Yesterday, I started the list of things to know before you claim your tax credit. If you missed it, go back and check out part one. The list covers the forms you'll need, the tax credit maximums, which credits can (and cannot) be carried over, which credits include installation costs (and which don't), and when you need to deduct state and local incentives.
Today, I'll cover five more things you should know before you claim your tax credit.
- Know If You Are Eligible to Receive Tax Credits
If you do not pay taxes, you cannot get the tax credit. Since the energy-efficiency tax credit is "non-refundable," you can't get back more in credits than you paid in taxes.
- Know When Your Product was "Placed in Service"
You can only claim the credit for 2009 if the product was "placed in service" by December 31, 2009. That means that the product was installed and you are able to use it. If you purchased the product in 2009 but did not install it before the end of the year, you will need to wait until you file your 2010 taxes to claim your credit.
- Know Whether Your Renovation, Existing Home, or New Home Qualifies for the Credit
Renovations to existing homes are eligible for tax credits.
The energy efficiency tax credits available in 2009 and 2010 are only available for existing homes. New homes are not eligible. Products that fall under this rule include biomass stoves, HVAC equipment, insulation and air sealing materials, roofing, water heaters, and windows and doors.
However, consumers building new homes can take advantage of the tax credits for geothermal heat pumps, solar energy systems, wind energy systems, and fuel cells, through 2016.
- Know How to Calculate the Credits for Spouses or Joint Home Owners
If you are married and filing jointly, the amount of credit you receive does not double. If you and your spouse lived apart in separate principal residences, then you can each receive a $1,500 credit for any improvements.
If you are unmarried but own a home jointly, you can each receive a tax credit but the maximum credit for the home is $1,500 (for the energy-efficiency credits) or 30% (for the products available through 2016). To calculate the tax credit, figure out what percent of the total cost each person spent. Each should get the same percent of the total tax credit available for the home.
- If You Own Multiple Properties, Know Which of Them Qualify for Credits
The energy efficiency tax credits are available for improvements made to your principal residence—that is, a home you own where you live most of the time. Products that fall under this requirement include biomass stoves, HVAC equipment, insulation and air sealing materials, roofing, water heaters, windows and doors, and fuel cells.
The home must be in the United States and could be a house, houseboat, mobile home, cooperative apartment, condo, and manufactured home.
If you are a renter, you do not qualify for the tax credits.
Renewable energy property, however does not have to be installed in a principal residence to qualify for the credit. If you install a geothermal heat pump, solar energy system, or wind energy system in a second home, you can qualify for the tax credit. If you rent your second home for part of the year (less than 80%), you can claim the credit based on the amount of time you live in the home For example, if you spend six months of year in a second home, you can take half of the available credit.
Be sure to read the instructions on form 5695 for more.
And again my disclaimer: Please talk to your accountant or contact the IRS if you have questions about your specific tax situation.
Other great resources are the IRS Web site and the ENERGY STAR® FAQs on tax credits. I chose the topics in today's and yesterday's list because I thought they were items readers may not have considered; if anything here is confusing or doesn't answer your question, please let me know, but also check out those sites for more information.
Allison Casey is a senior communicator at DOE's National Renewable Energy Laboratory, which assists EERE in providing technical content for many of its Web sites.