Posted by : Daniel Stoica in (Articles, Tax Deductions) On: May 18th, 2011
Tagged Under : accounting professional, air conditioners, appliances, biomass stoves, credits, deductions, dollars, doors, electric vehicles, energy efficient, fans, furnaces, gasoline, go green, heaters, hybrid, income tax, insulation, mileage, money, roof, save, Schedule A, Tax, tax laws, tax professional, tax refunds, vehicles, windows
For several years now, the U.S. government has been encouraging Americans to “go green”, meaning, by using as many energy efficient, recycled/recyclable, and pollution reducing products as possible, you are contributing to saving the planet. More and more people are doing just that, but not everyone is aware that because of these products, you can receive several tax credits. Keep in mind that the tax credits for the 2011 tax year are slightly lower than the 2010 tax year.
IRS Tax Tip 2010-66
When you use energy-efficient products, not only will you save money on your energy bills, you will also save on your tax return. The Internal Revenue Service has listed six energy-related tax credits, which have been created by the American Recovery and Reinvestment Act of 2009. The complete list can be found at http://www.irs.gov/newsroom/article/0,,id=220989,00.html.
To make your home more energy efficient, there are Energy Star appliances. Be aware, though, that not all Energy Star products qualify for the tax credit. In December of 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This law extends the tax credits for energy efficient products through 2011, but at lower levels.
There is a $500 lifetime limit on all home products. If you qualified for over $500 in tax credits from 2006 – 2010, you are no longer eligible for future credits. You can receive 10%, or up to $500, for insulation, roofs, and doors. Window insulation is capped at $200. New furnaces and boilers are capped at $150, and all must meet 95 AFUE. There is a $50 credit for maintaining an advanced main air circulating fan. And finally, there is a $300 tax credit for air conditioners, air source heat pumps, water heaters, and biomass stoves.
As far as your vehicle is concerned, note that the hybrid tax credit ended at the end of 2010. Tax credits for fuel-efficient vehicles are still fairly new and a very good tax break to get, but the rules were a little confusing for some.
With different amounts expiring at different times, it was hard to keep track of them all. After the Toyota Pruis tax credit expired, not many people looking for a hybrid vehicle cared much about it.
With gas at nearly $4 per gallon now, people are looking for vehicles that have better gas mileage, and people who are looking for even higher-efficiency vehicles are looking at electric vehicles. Those who purchase electric vehicles could get a tax credit between $2,500 and $7,500, depending on the vehicle’s battery capacity.
Since these credits reduce your tax bill almost dollar for dollar, it’s a more appealing tax break. It could also help make up for the higher price of an electric vehicle.
According to the Expanded Recovery Act, these are considered credits, not deductions, so they will increase your refund or reduce any tax you may owe. You can claim these credits, even if you itemize deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure and claim these credits.
It is highly recommended that you seek the advice of a tax professional to determine what credits you are eligible for next year. He or she can assist you in getting the most deductions and credits you are entitled to if you have made your home more energy efficient and purchased a hybrid or electric vehicle.