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Get Some Tax Savings From Home Energy Credits Before the Year Ends!

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On November 21st 2011, the IRS posted an article on their website to remind taxpayers that some of the energy efficiency costs would still award taxpayers a tax credit.
The remainder must have come as a last minute call as these tax credits will be expired by the end of 2011.
These credits were part of the stimulus package that was passed in 2009 and they were set to end in 2010.
However, some of the credits were extended to 2011 - however the credits were fewer and much lower in value.
For those taxpayers who have not taken advantage of these tax credits, there is still little time left before the end of the year to take advantage.
Below are some of the details regarding these credits:
  • Cost of qualified energy efficiency improvements - For 2011, the costs incurred in installing various energy efficiency improvements qualify you for a tax credit of 10% of the costs incurred up to a maximum of $500.
    The installations include windows, doors, and roofing that is energy efficient.
    If you install windows only, the cap of the credit that one can claim is $200.
  • Cost of residential energy property - You can also claim a tax credit for home modifications in relation to energy improvements.
    The credit can also be claimed for labor and other installation costs.
    These home modifications include having an energy efficient heating system or air conditioning system.
    The credit is also given equal to 10% of the costs incurred subject to a cap of $500.
  • Lifetime limit - These credits are a lifetime credit and can only be claimed once.
    In other words, every taxpayer is entitled to $500 cap for energy efficiency installations.
    Therefore, if a taxpayer claimed $300 in 2010, he or she can only claim the difference of $200.
    If the credit was exhausted in prior years, the taxpayer can then not make a claim for the credit.
  • Residential Energy Efficient Property Credit - The Residential Energy Efficient Property Credit is provided to taxpayers who go green with their home energy costs.
    A taxpayer can claim a credit equivalent to 30% of the costs incurred in qualifying costs including costs for installing solar water heaters, solar electricity systems, wind turbines, geothermal heat pumps and fuel cell property.
    Labor costs will generally be accepted as part of the qualifying costs.
    Various caps apply to the credit with the exemption of the fuel cell property installation that has no limit to the credit amount.
  • Manufacturer's tax credit certification - When making various installations to take advantage of the tax credit, ensure that the products being installed are qualified for the tax credit.
    The product packages will have the certification of the products for claiming the credit.
    You can also confirm such certification by checking the manufactures website.
  • Form 5695, Residential Energy Credits - To claim the aforementioned energy saving credits, you will need to file Form 5695, "Residential Energy Credits Form" and attach the support documentations.
    You can then file the form together with your tax returns.
    Since the credits are only available for 2011, you need to make the claim for the credits in your 2011 tax returns.
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