If you installed solar equipment or recently insulated your home, you may qualify for two tax credits- the Non-business Energy Property Credit and the Residential Energy Efficient Property Credit. Not all energy-efficient improvements qualify, so make sure that you have the manufacturer’s tax credit certification statement. This statement can usually be found on the manufacturer’s website or with the product packaging.
1. The Non-business Energy Property Credit: If you installed energy-efficient improvements in your home, you may qualify for this credit. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500. Qualifying improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count. You can also claim a credit including installation costs, for certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel. The credit has a lifetime limit of $500, of which only $200 may be used for windows. Please note that if you’ve claimed more than $500 of non-business energy property credits since 2005, you can not claim the credit for 2011. Qualifying improvements must have been placed into service in your principal residence located in the United States before January 1, 2012.
2. Residential Energy Efficient Property Credit: If you installed qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines, you may qualify for this credit, which runs through 2016. The credit is 30% of the cost of qualified property. There is no cap on the amount of credit available, except for fuel cell property. You may generally include labor costs when figuring the credit and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; geothermal heat pumps qualify only when installed on or in connection with your main home located in the United States.
If you’re eligible, you can claim both of these credits on Form 5695, Residential Energy Credits when you file your 2011 federal income tax return. Also, note these are tax credits and not deductions, so they will generally reduce the amount of tax owed dollar for dollar. Finally, you may claim these credits regardless of whether you itemize deductions on IRS Schedule A.
You can find Form 5695 at IRS.gov or order it by calling 1-800-TAX-FORM (800-829-3676).