Tax Tip: The Residential Energy Credit Is Back

Tax Tip: The Residential Energy Credit Is Back

Editor's Note: This article is part of our 2013 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) — One of the expired tax breaks extended by the recently passed American Taxpayer Relief Act of 2012 is the cumulative “Nonbusiness Energy Property Credit” for qualified energy efficiency improvements or residential energy property costs for your primary principal residence.

The credit, claimed on IRS Form 5695, is 10% of the qualified cost, up to a maximum of $500. This is a “lifetime” limit. If you claimed at least $500 in energy credits from 2006 through 2011 you are not eligible for the credit for 2012.

The credit can be claimed on:

  • Biomass stoves
  • Heating, ventilating and air conditioning (advanced main air circulating fan, air source heat pumps, central air conditioning, gas, propane or oil hot water boiler and natural gas, propane or oil furnace)
  • Water heaters (gas, propane or oil water heater and electric heat pump water heater)
  • Insulation
  • Roofing (metal and asphalt)
  • Windows and doors

Installation costs are also eligible for the credit on the first three of the above items. Some items have individual limitations of from $50 to $300.

There are very specific “energy efficiency” requirements for each of the items. Not every new window, door, boiler, furnace, heater or roofing improvement will qualify. You can go to the Energy Star website to find out what the specific qualifications are for the individual items.

This credit was extended through Dec. 31 so it will also be available on qualified purchases and improvements made in 2013.

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