“Going green” is a hot topic right now. From individuals to large corporations, it seems like everyone is looking for ways they can protect the environment and cut back on their energy consumption. As you may or may not know, the IRS encourages people to make energy-efficient changes to their homes by providing tax credits for qualifying upgrades. We’d like to tell you a little more about these available tax credits so that you know what you qualify for.
The first type of credit available is for items purchased that produce energy of their own. This includes items such as solar panels, geothermal heat pumps, and wind turbines—items that use a natural resource to produce energy for your home. The credit also applies to fuel cells used to store energy created by these sources.
If you install any of these kinds of items on your private property, you can qualify for a credit of 30% of the cost of installing the energy-producing property. This includes not only the cost of the item itself, but the costs of labor, assembly, installation, and any wiring or piping changes made to your home in order to integrate the new energy source.
It is important that you keep a detailed list of the costs, as well as copies of receipts, in order to qualify for your credit. A CPA will be able to tell you what documents are important and help you file for the credit.
Most homeowners are unlikely to install solar panels or wind turbines on their private property. However, it is quite common for homeowners to make renovations to their home that make it more energy efficient. This includes the following types of upgrades:
These types of energy-efficient upgrades do not qualify for the credit we previously mentioned, because they simply save energy, as opposed to actually producing energy of their own. Instead, they qualify for a credit equal to the sum of 10% of the costs of the improvements.
Overall, you cannot receive more than a total $500 in this credit for all tax years after 2005. There are additional limits to this credit, depending on what types of improvements you are making to your home; you should speak to a CPA to ensure that you are meeting qualifications for this credit, and not exceeding any limitations.
If you’re making energy-efficient improvements in your home, come speak to us at The Jones CPA Group. We will let you know if your improvements qualify for the credit, and how much of a credit you can expect to receive on your next tax return.
For more information on tax credits, give us a call or stop by our Orem CPA office.