‘Fiscal Cliff’ Legislation Brings Residential Energy Credit Back to Life
A tax credit program encouraging consumers to make energy-efficient improvements to their residences, seemingly allowed to sunset after 2011, was revived for both 2012 and 2013 as a result of the legislation passed by Congress to address the “fiscal cliff.” Homeowners who made qualifying improvements in 2012 should search through their receipts and retrieve documentation of these improvements, as the potential reward can be significant.
In the summer of 2005, Congress passed legislation permitting some property owners to take a credit on their federal income tax returns if they made certain improvements to their property that improved the energy efficiency of the property. The credit was set to expire after 2010, but the Tax Relief and Job Creation Act of 2010 extended by one year.
The credit appeared to have sunset after 2011, but when Congress enacted the American Taxpayer Relief Act of 2012, it resurrected the credit for both this year and last.
The credit’s benefits have fluctuated over time. The maximum was as high as $1,500 in 2009 and 2010. For the 2011-13 tax years, the credit maximum is $500. This is a lifetime credit, so if you already claimed credits of $500 or more in previous years, the resuscitation of the credit has no impact on you because you are ineligible to claim the credit again.
For those who have not cleared the $500 minimum, note that a wide variety of items may qualify. For roofs, doors, skylights and insulation, you can take, as your credit, 10% of your cost, up to $500. So, if you purchased qualifying energy-efficient new roofing materials that cost you $5,500 (not including installation,) you can claim your full $500 lifetime credit from this purchase alone. For windows, the credit is still calculated at 10%, but the maximum you can claim for this improvement is $200. Water heaters, biomass stoves and heat pumps offer a maximum of $300 each. A new boiler or furnace entitles you to up to $150. In the case of many of these qualifying items, you may not include the cost of installation in your credit. If you are contemplating making a qualifying improvement in 2013, it is important to remember that just because an item is Energy Star qualified, installing it does not necessarily make you eligible for the credit. Consumers should inquire of their sellers regarding the product’s eligibility. “Homeowners need to be aware that the person they’re doing business with has a certification letter from the manufacturer that they can provide at the time of purchase that does prove the product is Energy Star and does qualify for the tax credit. Having that is vital,” John Kuhl, division manager with Champion Window Sunrooms and Home Exteriors in Greensboro, N.C. explained to the Winston-Salem Journal.
Filing your federal income taxes can be fraught with risks, with one of those being the failure to claim every deduction and credit to which you are eligible. To ensure that you get everything for which you qualify, consult the tax attorneys at Samuel C. Berger, P.C. and the CPAs at S.C. Berger, P.C., who help people throughout New York and northern New Jersey all manner of income tax issues. To consult our attorneys and CPAs, contact us online or call (201) 587-1500 or (212) 380-8117.
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