As of today, you have exactly 25 shopping days until Christmas – and 33 days to take advantage of the Residential Energy Credit! The credit expires at the end of the year, and has two parts:
Part 1 – Nonbusiness Energy Property Credit
This credit gives homeowners back 30% of the cost of eligible energy-efficient home improvements (up to $1500). Qualifying expenses include high-efficiency heat pumps and heating systems, air conditioning systems, and water heaters, including the labor and installation costs.
Energy-efficient windows and doors, as well as some qualifying insulation materials and roofs, are also included in the credit, though labor for installing them is not.
- Meet or exceed the 2000 International Energy Conservation code criteria.
- Be installed in your primary home.
- Be paid for or incurred during 2009 or 2010 ($1,500 total is for combined tax years).
Part 2 – Residential Energy Efficient Property Credit
The Residential Energy Efficient Property Credit saves homeowners 30% on alternative energy investments. Qualifying items include solar panels, solar water heaters, geothermal heat pumps, small wind energy turbines, and even fuel cells (up to $500 for each .5 kilowatt generated). There is no maximum to this credit (except the fuel cells restriction), and labor costs are included.
Unlike the Nonbusiness Energy Property Credit, the home does not need to be your primary residence. Of course you should check to be extra sure that the system you choose meets the IRS qualifications.
Time is running out!
Don’t let this amazing opportunity slip through your fingers while you’re being distracted by all the holiday hullabaloo. Consider giving your family the gift of lower energy bills by investing in home improvements. Not only will your home be more comfortable and your monthly expenses lighter, you’ll also get some money back in your pocket to boot!
Keep in mind, unlike a deduction – which reduces income on which you owe taxes – a credit actually reduces the amount of tax owed. So a $1500 tax credit will reduce your tax owed by $1500.
And remember: I’m not a tax professional, so be sure to check with one when making tax plans!