While many Americans bemoaned the expiration of key Energy Star tax credits at the end of 2011, few likely noticed that those credits are back for the 2012 tax year, thanks to the American Taxpayer Relief Act.
All that fiscal cliff bickering and posturing in January just about drowned out the good news that Congress restored energy efficiency tax credits with a cumulative deduction of up to $500. What's more, those deductions can count toward purchases made in both 2012 and 2013. So if you bought an efficient new central air conditioner, heat pump, or water heater in 2012 not anticipating any deduction, you're in luck. The restored residential tax credits cover up to 10% of the cost of those items up to the $500 deduction ceiling. Other eligible items include windows, window treatments with a demonstrated energy benefit, insulation, and metal or asphalt roofing.
As before, the tax credit applies only to an existing home or your principal residence; new construction and rentals do not qualify. Also, anyone who received a rebate of $500 or more from the similar tax credit in effect during 2010 and 2011 is not eligible for the 2012-2013 credit. For anyone who received a credit of less than $500 during these prior years, that amount will be deducted from the $500 cap for the 2012-2013 year. The 2012-2013 tax credit is subject to a lifetime limitation of $500.
To apply for the tax credits for your 2012 purchases, you'll need to file I.R.S. Form 5695 for Residential Energy Credits, a 5-page attachment that your accountant or tax preparer can fill out easily with the proper receipts and documentation.
More Energy-Efficient Tax Credits
Meanwhile, another key deduction still applies for those taxpayers who are particularly energy savvy. Through December 31, 2016, you'll be able to claim 30% of the cost of geothermal heat pumps, small wind turbines (residential), and solar energy systems with no upper limit. Existing homes and new construction qualify; principal residences and second homes qualify, too, though rentals do not. You can also get a credit of up to 30% of the cost of residential fuel cells, up to $500 per .5kW of power capacity, according to Energy Star, through the end of 2016.
That link also includes a complete list of items eligible for the federal government's restored tax credit. To check the list, just click on the name of one of the main categories, such as "Biomass Stoves" or "Windows & Doors." The link then expands to display what qualified items fall under that heading. Note that many of the items require Energy Star certification, and installation costs are not covered under the federal tax credit program.
As for what will happen beyond the 2013 tax year, no one knows for sure. But according to The Energy Collective, multiple U.S. senators expressed support for continuing the incentives in some form at a recent Senate Finance Committee hearing.
So while they can't agree on how to end the Great Sequester Showdown, it appears that Republicans and Democrats do have some consensus on making sure Uncle Sam rewards you for buying energy-smart products.
Front page photo credit: Atlanta Home Improvement