IRS Goes Green

Did you know that the IRS is among the institutions that are trying to provide a “Green “world?

That is, if certain conditions are met IRS will help you pay your taxes when you make certain energy-efficiency improvements to your home. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, stoves that burn biomass fuel and non-solar water heaters. Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

There is a $500 lifetime limit for this type of credit, meaning that if you have already received some credit in past years, the amount of the available credit for 2011 is limited. And for products "placed in service" in 2011, IRS Form 5695 needs to be completed and filed with your 2011 taxes (by April 15, 2012).

Other limits and qualifications apply, and this is one more excellent reason to be in touch with your PRO-TAX professional!

Homeowners going green could also qualify for the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. Some of those credits extend to 2016 –that is from 2006 through December 31, 2016 for existing principle residences or new construction.

This is a different credit that equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Presently, no cap exists on the amount of credit available except for fuel cell property, and generally, labor costs are included when figuring this credit. 

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A. As mentioned above, your PRO-TAX Professional Preparers can and will advise you so that you can obtain these valuable tax credits. You can call us at 1-800-809-2829, or click here for a guide to our locations. As always, PRO-TAX is here to help!

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