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Tax credits and deductions for winter home improvements

Posted by Andrew Chan  November 15, 2010 05:00 PM

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The American Recovery and Reinvestment Act of 2009 expanded two energy tax credits that allow homeowners to make energy saving home improvements and receive a tax credit for those improvements. The two credits are the non-business energy property credit and the residential energy efficient property credit.

In addition to reducing your overall energy costs, these credits will reduce the amount of your tax liability or increase your refund. Taxpayers can claim these credits on there 2010 tax return even if they do not itemize deductions on Schedule A. Here’s how each of the credits work.

Non-business Energy Property Credit:
This credit allows homeowners to receive a tax credit of up to 30 percent of what they spend on eligible energy-saving improvements (including labor) for certain high-efficiency heating and air conditioning systems, water heaters, and biomass burning stoves. Energy-efficient windows, skylights, and doors also qualify for the credit. The total tax credit received for 2009 and 2010 cannot exceed $1,500.

Residential Energy Efficient Property Credit:
This credit provides a tax credit for alternative energy equipment. Similar to the non-business Energy Property Credit, homeowners can receive up to 30 percent of the amount spent on residential energy efficient property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. However, unlike the first credit, there is no maximum limit on the dollar amount of this credit except for the limit on fuel cell property.

Keep in mind that not all energy-efficient improvements qualify for these tax credits. The IRS cautions homeowners to check the manufacturer’s tax credit certification statement before purchasing or installing any of these products and improvements. The tax credit certification statement is not the same as the Department of Energy’s Energy Star label. While many Energy Star products will provide you with an overall savings on your energy consumption, not all Energy Star products are eligible for these tax credits.

For more information on these credits visit the IRS’ web site at http://www.irs.gov/newsroom/article/0,,id=206875,00.html


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