2010 is almost over but you still have time to take advantage of the Federal Tax credits for energy efficiency. Here’s the quick and dirty on it:
You can get a 30% tax break on the cost of adding insulation, energy efficient exetrior windows, doors or skylights, or a heating and cooling system. The maximum amount you can get is $1,500. If you received $1,500 for this credit last year, you can’t get it again this year. If you only got part of the credit (say $800) then you can receive up the the remaining $1,500 (in this case, $700) this year. This is the most common energy tax credit that people are claiming on their tax returns. Anything you buy must be installed in your principal residence by December 31, 2010. Principal residence, it means you have to live in the house also. It can’t be a second home or a rental unit.
If you’re really into alternative energy, there’s a different energy credit that also gives you a 30% tax break with no dollar limit. This is for stuff like solar water heaters, geothermal heat pumps and small wind turbines. You must also install these items by December 31st, but you can put them on a second home as well as your principal residence.
Know what you’re getting before you buy though. Crazy as it may seem, not every energy efficient item is included in the tax credits. The best way to figure out if you’ll qualify for the tax credit is through the Energy Star website:
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
Lets say you want to buy a water heater. Go to the site, scroll down to where it lists items you can purchase for the tax credit and click on “water heater (non-solar)” . The site will tell you what qualifications your new water heater needs to have in order to qualify for the tax credit. The web site has all sorts of information, including frequently asked questions. Best of all, it’s in plain English.
To be honest, it depends. If you’re single or married and only have w2 income, then you can file a 1040EZ. Add in kids, or things like an IRA deduction, then you go to a 1040A. If you’re itemizing deductions like real estate taxes and mortgage interest, then you’ve got a regular 1040. The really nice thing about using a software program is that you don’t have to think about which IRS form you need. Just go through the interview in the software and it will figure out the right form for you. If you still have questions, feel free to contact me directly.