Last Chance to Cash in on Home Energy Credit

12/1/2010 | Written by: Karen Reed, EA

If you’ve been putting off making your home more energy efficient, it’s time to hurry up and make that trip to your local home improvement store. The reason is that the Nonbusiness Energy Property Credit is expiring at the end of this month, based on current law.

The Nonbusiness Energy Property Credit can reduce your taxes by thirty percent of the amount you spend on energy–saving improvements to your main home, up to $1,500. It’s available for purchase and installation costs of high–efficiency heating and air conditioning systems, water heaters, and stoves that burn biomass fuels such as wood and corn pellets. You can also receive the credit for buying energy–efficient windows and skylights, energy–efficient doors, specific types of insulation and certain roofs, but installation costs for these items do not qualify.

While you’re shopping, don’t forget about the Residential Energy Efficient Property Credit, which applies to amounts you invest in alternative energy equipment for your home. This credit will be around through 2016, and it includes solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Unless it relates to fuel cell property, there’s no cap on the credit, which rewards you with a tax savings of thirty percent of your purchase and installation expenses. The home you buy the energy efficient property for does not have to be your main home, unless you are claiming the credit for fuel cell property costs.

Be sure the check the manufacturer’s tax credit certification statement to make sure the equipment you’re buying qualifies for the tax credits. Not all Energy Star labeled products qualify for the tax credits, so review the manufacturer’s product information carefully. The home energy credits are nonrefundable tax credits. They can be applied to taxes you owe, but they cannot reduce your taxes to less than zero. In other words, nonrefundable credits cannot result in a refund that is more than the amount you had withheld from your income.