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IRS Tax Tip; Home Energy Credits Save Money and Cut Taxes

posted Mar 13, 2016, 9:30 AM by Zaher Fallahi

You can legally reduce your taxes and save on your energy bills with certain home improvements. Here are some key facts from the IRS to know about home energy tax credits:

 

Non-Business Energy Property Credit 

1- Part of this credit is 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include insulation, windows, doors and roofs.

2- The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include water heaters and heating and air conditioning systems. The credit for each type of property has a different dollar limit.

3- This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.

4- Your main home must be located in the U.S. to qualify for the tax credit.

5- Be sure you have the written certification from the manufacturer that their product qualifies for this credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the tax credit, but do not attach it to your return. Keep it with your tax backup documents.

6- You may claim the tax credit on your 2015 tax return if you didn’t reach the lifetime limit in past years. Under current tax law, this credit is available through Dec. 31, 2016.

 

Residential Energy Efficient Property Credit

1- This tax credit is 30 percent of the cost of alternative energy saving equipment installed on or in your home.

2- Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.

3- There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this tax credit to next year’s tax return.

4- The home must be located in the U.S. It doesn’t need to be your main home, unless the alternative energy equipment is qualified fuel cell property.

5- This credit is available through 2016.

 

Use Form 5695, Residential Energy Credits, to claim these credits. You can get IRS forms anytime on IRS.gov/forms.  Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Zaher Fallahi, Tax attorney, CPA, advises taxpayers including Americans-living abroad, with their  tax preparation, tax planning, IRS representation, undisclosed foreign bank accounts and foreign trusts. We may be reached at (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), or e-mail to:  taxattorney@zfcpa.com

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