With the tax season in full swing, it is important to know the advantages of "going green". It seems that solar panels are all the buzz, but many consumers do not know that there are tax benefits to doing all sorts of renovations to your home. Smaller projects can impact your home's value, save money on your electric bills, and save money at tax time.
Many energy efficient upgrades are tax credits, not simply deductions. Tax credits can often be better than deductions. A deduction brings down your taxable income, thus bringing down your overall tax bill. This sounds wonderful, but there is often a muted effect on your refund. For example, a $1000 deduction does not result in a $1000 tax bill reduction . A tax credit is different. A $300 tax credit means that you save $300. (Every individual's tax situation is different. Consult a tax professional to see if any programs work for you.)
If you have done any energy efficient upgrades to your home, then make sure to save those receipts! If you are thinking of doing some upgrades, then you will be happy to know that some or all of these could remain in 2017. The non-business energy property credits are for primary residences built before January 1, 2016. In other words, these credits are not for vacation homes. The reason for the credits is to save energy. One important thing to remember is that there is a lifetime cap of $500. This means that once you have claimed it, then you are done.
Here are a couple of credits for you to consider:
$300 credit for the following: air source heat pumps, biomass stoves, energy efficient non-solar tankless water heaters, and central air conditioning units.
$150 credit for the following: hot water boilers, and furnaces
10% of the cost (not including labor)savings for the following: energy efficient doors, energy efficient roofs,energy efficient skylights and windows (up to $200), and insulation.
The deadline for the work to be completed is December 31, 2016, which is the date that the tax breaks expire, but it is noteworthy that they are usually extended. In fact, most years they are. If course, there are no gaurantees so consult a tax professional.
There are also tax credits for energy producing upgrades, such as: solar panels, geothermal heat pumps, small wind turbines, fuel cells, and solar water heaters (not for pools and hot tubs). These tax credits apply to all residential homes, and are not subject to an upper limit. This means that you can really save some green while going green! This tax credit is for 30% of cost including the cost of installation (only on main house). This tax credit is good until 2019, so upgrade and save while there is time. Of course, Congress could change these credits, so make use of them while they are here.
Please feel free to reach out to us for more information on this, as well as other subjects concerning real estate. For questions directly related to the applicability of stated tax benefits, please consult your tax professional.
Jonathan Gunnels, BIC