Interested in making an easy $1500? You can do it this year, simply by claiming tax credits on energy-related purchases. It’s all thanks to the government stimulus plan, which, in addition to jumpstarting the economy is also aiming to protect the environment. Find out how to save on your taxes by saving energy in the tips below.
The energy tax credit breakdown
If your home is especially cold in the winter or hot in the summer, you might consider looking into energy improvements. Not only will these improvements make your home environment more comfortable, they’ll also land some money back in your pocket.
This is all thanks to the Federal Tax Credits for Consumer Energy Efficiency – a new program unveiled by the federal government this year.
Look at it this way: the federal government has volunteered to help you with the cost of creating an energy efficient home. And if you take the advice and install energy-efficient products and make energy-conscious changes within your home, you’ll save as much as $1500 on your taxes. Better yet, the offer is good throughout 2009 and through 2010.
Energy efficient (and easy!) installation ideas
Here’s a list of some of the many energy efficient improvements you can make to your home. Note that not all Energy Star products qualify for a tax credit.
- Skylights
- Ceiling fans
- An enhanced model furnace
- Energy efficient doors
- Energy efficient windows
- Non-solar water heaters
- Metal or asphalt roofs
- Upgraded insulation
- Biomass stoves
- Solar energy systems
- Geothermal heat pumps
- Residential wind turbines
How do you get the full $1500 tax credit?
In most cases, the government tax credit amounts to about 30% of what you spend on energy improvements around your home. So a $5,000 investment in new windows qualifies you for a $1500 tax credit.
Keep in mind, a tax credit of $1500 is a big deal. It means $1500 of real money back in your pocket. It’s far better than a tax deduction, which only lowers the total amount of income on which you’re taxed.
To apply for the tax credit you need to fill out the IRS Form 5695. If your energy purchase was made in 2009, submit the form with your 2009 taxes. Likewise for your 2010 taxes.
Be careful though – you actually need to consider the year in which the product was officially placed in service. So if you buy a solar energy system in 2009 but can’t get it installed until 2010, you’ll need to claim it on your 2010 tax return.
It’s always a wise idea to keep careful records of receipts from energy-efficient purchases. In the event you’re ever audited, you’ll need to summon those receipts for prove that you merit the tax credit.
Just make sure to follow the rules…
The products you purchase do have to meet a couple qualifications. For one, the improvements you make have to be for your primary residence. This means you can’t get the energy tax credit on most things for improvements to a vacation or rental home.
There’s also a $1,500 limit – meaning the total amount you can get in energy tax credits is $1,500. Note that this is for 2009 and 2010 combined. In other words, if you claim $700 in energy tax credits for 2009, you can claim a total of $800 for 2010.
Visit the Energy Star website at www.energystar.gov for more information on energy saving standards.
Take advantage of a good thing while you can
In essence, the government wants to give you money as an incentive to save energy. It’s really a win-win situation. You wind up saving money and saving environment resources, which sets you up better for the future no matter how you look at it.
