For my clients in their first home in 2015, this year will be the first time that many will be able to write off expenses such as closing costs, job related moving expenses and mortgage interest. Also, anyone who owns a home also gets a benefit from being earth-friendly. You can receive a tax credit for many energy efficiency improvement expenses that you had in 2015. According to Turbotax, here’s what can and can’t be claimed:
You can claim:
Solar water heating costs
Solar electric costs
Fuel cell property costs
Small wind energy property costs
Geothermal heat pump property costs
Qualified central air conditioners
Certain advanced main air circulating fans
Exterior doors, exterior windows and skylights
Metal or asphalt roofs with qualified coatings
Insulation material or system to reduce heat loss
Certain electric heat pump water heaters, electric heat pumps
Furnaces and hot water boilers powered by natural gas, propane or oil
You can’t claim:
Energy Star appliances
The Residential Energy Credits for 2015 are:
- The nonbusiness energy property credit
- The residential property credit.
If you use less than 80% of an energy efficient item for personal (not business) purposes, you can claim the personal use portion of the costs to determine the credits.
Example: John’s business usage of the doors and windows he installed is 82%. He can claim only 18% of the cost of these items when determining his credit.
If you received a subsidy from a public utility company for your energy-efficient purchase, remember to reduce the subsidy amount from the purchase price before you claim it. If you include the subsidy in your income, you don’t have to make this adjustment.
The residential energy efficient property credit equals 30% of what you spend on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. These credits are claimed on Form 5695. Here’s a bit more information on this credit provided by Turbotax.
- Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property. Qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property.
- Not all energy-efficient improvements qualify for these tax credits. For that reason, you should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging.
- The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
- If you’re eligible, you can claim both of the residential energy credits. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax he or she owes.
- Keep in mind, these are not refundable credits, which means you can take the credit up to the tax owed. There is no refund of any credit amount left over.
- Further information on these credits can be obtained in IRS Form 5695. This form and more information can also be obtained through IRS.gov. You should also consult with your accountant for tax advice.