Get Credit for Making Your Home Energy-Efficient IRS Tax Tip 2013-48, April 4, 2013 If you made your home more energy efficient last year, you may qualify for a tax credit on your 2012 federal income tax return. Here is some basic information about home energy credits that you should know. Non-Business Energy Property Credit You may claim a credit of 10 percent of the cost of certain energy saving property that you added to your main home. This includes the cost of qualified insulation, windows, doors and roofs. In some cases, you may be able to claim the actual cost of certain qualified energy-efficient property. Each type of property has a different dollar limit. Examples include the cost of qualified water heaters and qualified heating and air conditioning systems. This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows. Your main home must be located in the U.S. to qualify for the credit. Not all energy-efficient improvements qualify, so be sure you have the manufacturer’s credit certification statement.

It is usually available on the manufacturer’s website or with the product’s packaging. The credit was to expire at the end of 2011. A recent law extended it for two years through the end of 2013. Residential Energy Efficient Property Credit This tax credit is 30 percent of the cost of alternative energy equipment that you installed on or in your home.air conditioner unit not window Qualified equipment includes solar hot water heaters, solar electric equipment and wind turbines.how to remove an ac unit home There is no limit on the amount of credit available for most types of property. how long do outside ac units lastIf your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.

You must install qualifying equipment in connection with your home located in the United States. It does not have to be your main home. The credit is available through 2016. Use Form 5695, Residential Energy Credits, to claim these credits. You can get Form 5695 at IRS.gov or order it by calling 1-800-TAX-FORM (800-829-3676). Form 5695, Residential Energy Credits Publication 17, Your Federal Income Tax Subscribe to IRS Tax TipsAs a homeowner you may be asking, "Do I get a tax break for all the money I've spent fixing up my house?" The answer is, maybe yes, maybe no. But one thing is certain: You'll need to keep track of all those home improvement expenses. When you make a home improvement, such as installing central air conditioning, adding a sunroom or replacing the roof, you can't deduct the cost in the year you spend the money. But if you keep track of those expenses, they may help you reduce your taxes in the year you sell your house. Money you spend on your home breaks down into two categories, taxwise: the cost of improvements versus the cost of repairs.

You add the cost of capital improvements to your tax basis in the house. Your tax basis is the amount you'll subtract from the sales price to determine the amount of your profit. A capital improvement is something that adds value to your home, prolongs its life or adapts it to new uses. There's no laundry list of what qualifies, but you can be sure you'll be able to add the cost of an addition to the house, a swimming pool, a new roof or a new central air-conditioning system. It's not restricted to big-ticket items, though. Adding an extra water heater counts, as does adding storm windows, an intercom, or a home security system. (Certain energy-saving home improvements can also yield tax credits at the time you make them.) The cost of repairs, on the other hand, is not added to your basis. Fixing a gutter, painting a room or replacing a window pane are examples of repairs rather than improvements. Tracking less critical than in past In the past, it was critical for homeowners to save receipts for anything that could qualify as an improvement.

Every dime added to basis was a dime less that the IRS could tax when the house was sold. But now that home-sale profits are tax-free for most owners, there's no guarantee that carefully tracking your basis will pay off. Save when you sell Under current law, the first $250,000 of profit on the sale of your principal residence is tax-free ($500,000 for married couples who file joint returns) if you have owned and lived in the home for at least two of the five years leading up to the sale. When this rule was passed into law, a lot of advisors thought it meant homeowners no longer had to track their basis. After all, how likely was it that someone would score a quarter of a million dollar profit (or a cool half a million) on their home? But even that large an exclusion may not be enough to shelter the profit in a home that you've owned for many years. So it still pays to keep good records. To determine the size of your profit when you sell, you take everything you paid for the house, the original purchase price, fees and so on, and add to that the cost of all the improvements you have made over the years to get a grand total, which is known as the "adjusted basis."

(If you sold a home prior to August 5, 1997 and took advantage of the old rule that let home seller put off the tax on their profit by "rolling" the profit over into a new home, your adjusted basis is reduced by the amount of any rolled-over profit.) Compare the adjusted basis with the sales price you get for the house. If you've made a profit, that gain may be taxable (generally only if the profit is more than $250,000 for an individual or $500,000 for a married couple filing jointly). Unfortunately, losses on sales of personal residences are not deductible. You can see it makes sense to keep track of whatever you spend to fix up, expand or repair your house, so you can reduce or avoid taxes when you sell. Make a special folder to save all your receipts and records for any improvements you make to your home. If you've lived in your house for many years, and area housing prices have been gradually going up over all those years, a portion of your gain on sale could be taxable.