We may have a little time before tax season starts up again, but that shouldn’t stop you from securing potential tax credits for 2016. The Residential Energy Efficiency Tax Credit expires on December 31, so you’re running out of time to take advantage. If you’ve already made some energy-saving improvements in your home, keep these in mind when you file your taxes next year.
Water heaters
If it’s time to replace your water heater, choosing an energy efficient option before the end of the year could help you save energy in the long run, and provide a nice tax incentive. The federal government is offering a $300 tax credit for electric heat pump water heaters, with an energy factor of at least 2.0. You’re also eligible for a $300 tax credit if you replace your unit with a gas, propane or oil water heater with a thermal efficiency of at least 90 percent.
Central Air Conditioner
You could get a $300 tax credit for qualified central air conditioners. Only those that have achieved the highest efficiency tier established by the Consortium for energy efficiency are eligible for the credit.
Electric Heat Pump
A $300 credit is available for qualified heat pump systems. These systems use the difference between the outdoor and indoor temperature to heat and cool your home. To be eligible, heat pump systems must meet the highest energy efficiency tier established by the Consortium for Energy Efficiency. All Energy Star models would qualify.
Biomass Stoves
A biomass stove might not be the right fit for every home, but there’s an available tax credit for those who install them. Biomass stoves use fuel from agricultural crops, trees, wood pellets, sawdust, plants, grasses and fibers. Systems that have a thermal efficiency rates of 75 percent or higher are eligible for a $300 tax credit.
Windows
Replacing windows, doors and skylights before the end of the year could earn you a tax credit when it comes time to file. By installing ENERGY STAR certified windows, doors and skylights, homeowners can receive a tax credit equal to 10 percent of the product cost, excluding installation. The credit cannot exceed $200 for windows and skylights and $500 for eligible doors.
Insulation
If you’re home has been feeling a bit drafty, it’s a good time to add a little insulation. A tax credit that expires at the end of the year could provide a little extra savings. The credit allows 10 percent of the product cost, excluding installation. However, the credit cannot exceed $500. According to Energy Star, most bulk insulation products can qualify, including batts, rolls, blow-in fibers, rigid boards and expanding spray.
Roof
Some roofing material is eligible for an energy efficiency tax credit in 2016. You could get a credit of 10 percent off the purchase, up to $500, for select Energy Star qualified roofs. To qualify, roofing products must be metal or asphalt with pigmented coatings or cooling granules designed to reduce heat gain. You can learn more about these energy saving roof materials by visiting www.energystar.gov.
How do I apply for the tax credit?
You’ll need to file IRS Tax Form 5695 when you submit your taxes. Keep receipts for purchases and the Manufacturer’s Certification Statement for your records.
The maximum energy efficiency tax credit a homeowner can take within any given year is $500, which could be accomplished with one or a combination of the eligible purchases. You may be ineligible to receive these credits if you met the cap in another year. Please visit with a tax professional or visit www.irs.gov to determine your eligibility for these credits.