What is the credit?
The 2009 American Recovery and Reinvestment Act reinstated Federal tax credits for taxpayers who make certain energy-efficient improvements to their homes. This tax credit applies only to improvements made to a primary residence from January 1, 2009 through December 31, 2010. Under section 25c of the Internal Revenue Code (I.R.C.), homeowners can receive a 30% credit on the costs up to $1,500, of “qualified energy efficiency improvements.” The maximum total credit to be claimed over the two year period is $1,500, meaning if the full credit is used in 2009, there is no additional credit available in 2010. Basically you can spend up to $5,000 during this 2 year period on one or more products, and get $1,500 (30% of $5,000 = $1,500) back as a tax credit. Remember, this credit is only available for improvements to the taxpayers’ principal place of residence, and not for new home construction.
What qualifies?
The energy-efficient improvements that qualify are windows, doors, insulation, roofs, HVAC, or non-solar water heaters. For more information on qualified energy-efficient improvements visit the IRS’s website at www.IRS.gov or www.energystar.gov.
What is a credit?
A tax credit is generally more valuable than an equivalent deduction because a tax credit reduces your tax dollar for dollar while a deduction only removes a percentage of the tax liability.
How to receive a credit?
Along with your 2009 Federal Income Tax Return, complete and attach IRS form 5695. Maintain copies of the dealer invoice and the Manufacturer’s Certification Statement for your records. A Manufacturer’s Certification Statement is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. In case of an IRS audit, these documents will need to be provided.
This blog entry is not intended to qualify as tax advice. To determine if this stragety is appropriate for your individual situaion, please contact a qualified tax advisor.
This entry was posted on Monday, December 21st, 2009 at 11:59 am and is filed under Tax Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.