Time is running out to cash in on a popular home-energy tax credit. If you install qualified insulation or energy-efficient replacement windows, doors or skylights in your primary residence by the end of the year, you’re eligible for a tax credit equal to 10% of the cost, up to a maximum credit of $500 (but no more than $200 of material costs -- not installation costs -- can be allocated for windows and skylights).
A tax credit, which reduces the amount of tax you owe, is more valuable than a tax deduction, which merely reduces the amount of income subject to tax.
The home-energy credit also covers super-efficient central air-conditioning units, heat pumps, furnaces and water heaters. But the $500 cap is a lifetime amount, so if you have claimed $500 or more in home energy tax credits in the past, you can’t claim it again for 2011. And unless Congress acts to extend it, the home energy tax credit disappears for good at the end of this year.
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There is no income-eligibility limit, so anyone, regardless of income, can claim the home-energy tax credit. Just fill out Form 5695 when you file your 2011 tax return next spring.
There’s an even bigger tax break available for homeowners who install renewable-energy devices such as geothermal heat pumps, solar water heaters, solar panels, fuel cells and small wind-energy systems. You can write off up to 30% of the cost of buying and installing such renewable energy devices -- with no maximum amount-- in your primary residence or vacation home. Qualifying improvements can be installed through 2016. (see www.energytaxincentives.org for details). To qualify for the renewable-energy-devices tax credit, no part of the system can be used to heat a swimming pool or hot tub. You can claim the credit on Form 5695 when you file your 2011 tax return next spring.
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