It is tax time again. If you want a larger refund now is the time to act, before the end of the year, December 31st. Although many of the residential energy credits are gone there is still hope.
Left are the Non-business Energy and Residential Energy Efficiency Tax Credits:
- Non-business credit is for insulation, windows, exterior (not inside) doors, and roofing. Also included are certain types of heating/cooling equipment and bio-mass stoves. But labor cost is not included.
- Residential Energy Efficiency credit is for installing green technologies such as wind turbines, solar systems, residential fuel cells, and geothermal systems. Labor can be included in these costs.
First let’s review the difference between a credit and a deduction. A simple explanation is that a deduction is subtracted; it is used to reduce your income thus making the tax on your income smaller. A credit gives you money; it is added after taxes calculations. It can make what you owe less or add to your refund making it bigger.
This is a cautionary tale. Any credit you take must be substantiated by receipts and in most cases the manufactures tax credit certification statement. DO NOT…I repeat, DO NOT go to your tax person without proper documentation. If you are audited and found not to have proof, that big refund will go away and you may suffer on the infamous “Treadmill of Payment Pain” with the IRS.
So let’s begin. This year the credit for outside windows, doors, roofing, insulation, bio mass stoves, and heating/cooling equipment has been reduced to 10% or up to $500. No matter how much you spend you can only get up to $500. Not $500, up to five hundred. If you received any credit for installing windows and doors previously you are not…I repeat are not eligible for this credit. I know you couldn’t afford to do all of them so you did half last year and the other half this year, sorry no credit for you. Also you have to make sure that the installations are the correct rating, if not, you CANNOT get a credit. Ask for the manufactures tax credit statement (before you purchase).
This year Uncle Sam is concentrating on alternative energy installations like geothermal, bio heaters, wind turbines, residential fuel cells and solar systems. The credit is 30 percent of all your cost, if they are correctly rated. Low income taxpayers may not be able to afford these. The credits end in 2016.
Before going to your tax preparer make sure they know about these credits, and don’t forget to explore the GreeningDetroit.com website for green products and contractors near you. Tina Humphrey is a registered tax preparer with 32 years of experience.
Author: Tina Riley-Humphrey, representing GreeningDetroit.com