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Tax credit gives break for energy improvements to homes

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By Nancy Kennedy

Going green is not only good for the environment, but may again this year be good for your wallet, thanks to Congress passing the American Taxpayer Relief Act of 2012 earlier this month.

This act extends the energy tax credits already available for qualifying energy-efficient home improvements, such as insulation or Energy Star-rated windows. (For complete list, see fact box.)

So, not only will you see your utility bills go down, but with certain improvements made in 2012 and also in 2013, you may be eligible to claim up to $500 in tax credits on your 2013 federal income tax return.

One caveat: If you have ever claimed $500 or more in tax credits for energy-efficiency home improvements in previous years, you are not eligible for this tax credit.

“This is not a new tax credit, but an extension,” said John Clarke, AARP Tax Aide district coordinator. “There is absolutely no change from the credits for 2010 and 2011.”

Clarke said the credit is applied to the amount of taxes owed and is not a refund.

“That’s a major misconception,” he said. “People go out and are told they’ll get all these credits for making improvements, but they’re led to believe they’re going to get a big check from the IRS. Not true.”

To qualify for the home energy efficiency tax credits for 2012 and 2013, energy improvements must be made to your primary U.S. residence, “placed in service” (the date of installation, not the date of purchase) from Jan. 1, 2011, through Dec. 31, 2013, and be reasonably expected to last at least five years.

When claiming these energy tax credits, use Form 5695 with your 1040 income tax form.

Clarke said the credit can be used whether you use the standard deduction or you itemize.  

Also, before you file, make sure you have a purchase receipt and a manufacturer’s certification statement from your contractor or retailer.

For example, qualifying energy-efficient windows should come with a sticker from the manufacturer verifying that they, indeed, meet the Energy Star guidelines.

“For those who don’t have the manufacturer’s sticker and who have a receipt or a work order, what we would do is call Home Depot (or wherever they bought the item) and verify that the item meets the required specifications,” Clarke said.

ITEMS ELIGIBLE FOR TAX CREDITS

Eligible energy efficiency home improvements and their tax credit allowance include:

+ Insulation or insulating material that meets 2009 International Energy Conservation Code criteria — 10 percent of cost.

+ Exterior window or skylight that meets Energy Star requirements — 10 percent of cost up to $200.

+ Exterior door that meets Energy Star requirements — 10 percent of cost.

+ Metal roof with pigmented coating or asphalt roof with cooling granules that meet Energy Star requirements — 10 percent of cost.

+ Advanced main air circulating fan with electricity use of no more than 2 percent of total energy used by the furnace — $50.

+ Natural gas, propane or oil furnace or hot water boiler with annual fuel utilization efficiency (AFUE) rate not less than 95 — $150.

+ Electric heat pump water heater with energy factor of at least 2.0 — $300.

+ Electric heat pump that meets the 2009 Consortium for Energy Efficiency highest efficiency tier (SEER at least 15, EER at least 12.5, HSPF at least 8.5) — $300.

+ Central air conditioner that meets the 2009 Consortium for Energy Efficiency highest efficiency tier (SEER at least 16 and EER at least 13 for most air conditioners) — $300.

+ Natural gas, propane or oil water heater with an energy factor of at least .82 or a thermal efficiency rating of at least 90 percent — $300.

+ Biomass stove that heats a dwelling or water used in a dwelling, is fueled by plant-derived fuel and has a thermal efficiency rating of at least 75 percent — $300.

— Information from the Alliance to Save Energy (ASE), a nonprofit agency

Chronicle reporter Nancy Kennedy can be reached at nkennedy@chronicleonline.com or 352-564-2927.