Income tax day is just a month away and, if you’re like most of us, you’re scrambling to get your paperwork in order and uncover any deductions you might have missed. If you’ve been making energy-saving improvements to your home this past year, there’s a set of tax credits you may have missed. The 25C tax credits that were allowed to expire at the end of 2011 were reinstated at the end of 2012, and made retroactive to January 1, 2012, as a part of the “fiscal cliff” package. That means if you purchased and installed qualifying home improvements last year, you could qualify for up to $500 on your 2012 tax return.
What Are the 25C Tax Credits?
The US government is offering homeowners a tax credit of up to $500 for qualifying home improvement made to their primary residences during 2012. This includes money spent on materials and, in many cases, installation.
What Improvements Qualify?
A variety of products are included in the program, including Energy-Star rated exterior windows and doors, insulation, central air conditioning systems (maximum credit $300), heat pumps ($300), water heaters ($300) and furnaces ($150). Not all models qualify. It’s a good idea to consult a heating and cooling specialist to see if your purchase qualified you for the credit.
One caveat to keep in mind: the energy-saving tax credits are cumulative, so if you claimed the $500 deduction in previous years (back to 2006,) you won’t be able to claim it again.
How Do I Claim the 25C Tax Credits?
Claiming the 25C energy tax credits is easy. You simply complete IRS Form 5696 and submit it with your 2012 federal income tax return. The credits will be automatically added to your refund (or deducted from your tax obligation.) It’s that easy. Of course, you’ll need to save your receipts for the improvements just in case you’re ever audited.
By the way, if you failed to make the necessary green improvements last year to qualify for the 25C energy saving tax credits, don’t despair. The program is in place through December 31, 2013. That might just be a good way to use your tax refund check this year.