It’s getting near tax time, which makes this a good time to talk about two energy efficiency tax credits for homeowners available today. Both are set to expire at the end of 2016, so the time to start planning your tax strategy is now. .
Energy Efficiency Tax Credit.
If you install equipment that helps to conserve energy while heating or cooling your home, you may be eligible for a tax credit. But be aware that the amount of the credit is fixed at no more than $500 in total and not more than $200 of that can be for energy efficient windows.
The credit is for up to 10% of the cost (but not installation) of qualifying doors, windows and skylights. In general, the items you purchase must be Energy Star rated to qualify. Consult a qualified tax consultant to be certain the products you intend to buy qualify.
Renewable Energy Tax Credit.
This is the credit you may get if you install qualifying equipment that produces energy for heating or cooling your primary residence from renewable sources of energy, such as solar, wind, and geothermal power. The credit is equal to 30% of the cost of the equipment. Unlike the Energy Efficiency Tax Credit, installation costs may be included. There is no upper limit on the size of this credit but note that it does not apply to second homes, rental property or vacation homes.
It covers the following alternative energy systems and equipment:
- Qualified fuel cell property
Qualified solar electric systems
Qualified solar water heaters
Qualified small wind energy property
Qualified geothermal heat pumps
Notice that each category is prefaced by the word “qualified”. Once again, make sure you consult a competent tax consultant to be certain the products you intend to purchase for your home meet the stipulations in the tax code. That way, there won’t be any nasty surprises waiting for you later.
The renewable energy credit is what is driving the huge increase in home solar systems at present. For companies that lease these systems, that federal credit goes to the leasing company, not the home owner, so make sure you understand what you are signing up for before you enter into any long term lease deals.
The pressure on Congress to extend these credits beyond 2016 from home solar companies will be intense. But our lawmakers are showing themselves to be in no mood to even acknowledge that climate change is happening. Some even want to roll back existing climate related regulations. And remember that 2016 is a presidential election year when politicians will say and do anything to get elected. No one can be sure whether either of these credits will be extended, so plan accordingly.