Federal Tax Credits: Energy Savings Tips

March 1, 2013 by  
Filed under Solar Energy Tips

On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012. While many of us were focused on its prevention from our going over the fiscal cliff, what you may not have realized was this: the tax reform that this act created helped to revive the home energy credits for 2012.

That is, federal tax credits related to home improvements that provide energy savings and that most assumed expired at the end of 2012 are alive and well and available for you to claim on your upcoming 2012 tax return. Or, if you didn’t make any energy-efficient improvements to your home in 2012—such as buying Energy Star appliances or maybe installing new insulation—you have through the end of 2013 to do so and then claim on your 2013 tax return.

In terms of dollars and sense, this energy tax credit basically allows you to claim 10 percent of the cost of installing qualified energy-efficient systems, items, or improvements in your home—up to $500. That is the tax credit can be as much as $500.

On a personal level we have someone coming out to our house tonight to measure for new windows. Given the bone-chilling winter we’ve had—and the fact that our heating oil bills have crept into the $600-plus range—we believe it is time to replace our home’s 51-year-old windows.

While we won’t recoup 100 percent of what we spend on windows with these federal tax credits, we will likely start spending less heating our home. I’d read that you can reduce your monthly heating bills by as much as 25 percent when you install new windows. That could be as much as $150 a month in savings for us! (Here are additional energy savings tips.)

In addition to replacing windows, other energy-efficient improvements that count for this tax credit and are available through December 31, 2013 include:

  • Biomass Stoves
  • HVAC Systems (heating, ventilation, air conditioning)
  • Insulation
  • New roofs (asphalt and metal)
  • Water heaters (non solar)
  • Windows and doors

What surprised me most about these federal tax credits is that certain products that you might not automatically associate with energy saving tips qualify for an energy credit. For example, window covering manufacturer Hunter Douglas offers a specific kind of blind that the federal government recognizes as “insulation.” According to Hunter Douglas this is likely because “Opaque Duette Architella shades can reduce heat loss through windows by up to 40 percent in winter and reduce solar heat gain through windows by up to 80 percent in summer.”

So where does that leave you? Well, you could conceivably buy and install these Duette Architella honeycomb shades, and, come tax time, include the receipt from your purchase—plus the Manufacturer’s Certification Statement—in order to file for the tax credit for energy savings on your return.

Whether you’re buying shades or an Energy Star appliance, keep the following in mind when thinking about these federal tax credits:

  • All energy-efficient products that qualify for this federal tax credit must be for existing homes where you live full time (i.e. your principal residence). New construction, even if it will be your primary residence, does not count.
  • Items must be purchased and installed between January 1, 2012, and December 31, 2013. 
  • Anyone who received a rebate of $500 or more from the similar tax credit that was in effect during 2010 and 2011 is not eligible for the credit for 2012-2013.
  • If you received a credit of less than $500 during these prior years, that amount will be deducted from the $500 credit for the 2012-2013 years.
  • The 2012-2013 tax credit is subject to a lifetime limitation of $500.
  • Homeowners should consult with their tax advisors to determine eligibility.

There are additional federal tax credits available for making energy improvements to your home. Visit this Energy Star site to get the details on those additional possible savings and tax credits, some of which go through 2016.

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