Saving Energy = Saving Money at Home During Tax Season

By Jose Weaver,2014-04-18 09:50
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Furthermore, North Carolina offers incentives to outfit existing homes with systems relying on renewable energy sources, such as solar and wind.

    Saving Energy = Saving Money At Home During Tax Season

To reduce U.S. energy usage and costs, federal and state governments are encouraging

    Americans to employ more energy efficient systems in their existing homes. Furthermore, North

    Carolina offers incentives to outfit existing homes with systems relying on renewable energy

    sources, such as solar and wind.

New federal tax credit

    The 2005 Energy Policy Act qualifies homeowners for a tax credit that encourages energy-

    efficient improvements to a home’s exterior (windows, doors, insulation) and to its heating, air

    conditioning, and ventilation (HVAC) and water heating equipment.

What is a tax credit?

    Unlike a deduction, which lowers taxable income, a tax credit reduces the actual tax paid, dollar-

    for-dollar. When making qualifying energy efficiency improvements to a home, homeowners won’t receive the credit instantly (like a rebate). When homeowners file their taxes, the credit will either

    increase the tax refund received or reduce the amount paid. Qualifying energy-efficient measures

    must be applied to homeowners’ main homes in the United States between January 1, 2006, and

    December 31, 2007. This one-time tax credit allows homeowners to receive up to a 10 percent

    credit or a total of $500 for the two years combined.

What is available for the tax credit?

    ? Insulation, sealing, weatherstripping, and exterior doors and storm doors: 10 percent of

    cost (not including installation). Credit may not exceed $500.

    ? Windows, storm windows, and skylights: 10 percent of cost (not including installation).

    Credit may not exceed $200.

    ? Energy Star pigmented metal roofs: 10 percent of cost (not including installation).

    ? Central air conditioners, heat pumps, geothermal heat pumps, water heaters: up to $300

    toward the full purchase price, including installation.

    ? Furnaces and boilers: up to $150 toward the full purchase price, including installation.

    ? Air-circulating furnace fan: up to $50, including installation.

How to receive energy tax credits

    Under the IRS rules, manufacturers must certify that specific products are eligible. Manufacturers,

    installers, and retailers provide customers with copies of these certifications. Homeowners need

    to file the appropriate IRS form for an energy credit, but do not need to submit certifications to the

    IRS. Energy credit forms are available from the IRS, Homeowners should keep the

    certifications and receipts on file.

Federal renewable energy tax credits

    The federal government also offers tax credits to homeowners who employ renewable energy

    sources in their homes. These systems must be “placed in service” or activated between January

    1, 2006 and December 31, 2007. The credit is calculated based on the individual’s expenditures

    excluding subsidized energy financing.

Qualifying renewable energy sources

    ? Residential solar electric or photovoltaic (PV) and solar water heat: 30 percent tax credit

    up to $2,000 for purchase and installation. Full credits are available for both a PV system

    and a solar water heating system. Credit does not apply to swimming pools or hot tubs.

    ? Fuel cells: 30 percent tax credit up to $500 per 0.5 kW

If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the next

    taxable year.

North Carolina renewable energy tax credits

    North Carolinians are eligible for tax credits on renewable energy systems. Renewable energy is

    energy derived from solar radiation, vegetation, organic wastes, moving water, or wind; it does

    not include energy from nuclear reactions or fossil fuels. Renewable energy property is

    equipment that uses renewable energy sources to heat or cool buildings; to produce hot water,

    thermal, or process heat; or to generate electricity.

Qualifying renewable energy sources

    ? Active and passive solar space heat: credit is limited to $3,500/dwelling unit and includes

    the cost of windows, thermal mass, and controls.

    ? Residential solar water heat and solar pool heat: credit limited to $1,400/dwelling unit.

    ? Biomass, hydroelectric, solar electric or photovoltaics (PV), and wind: credit limited to

    $10,500 per technology/dwelling unit.

    ? Solar thermal electric, solar thermal process heat, daylighting

Single-family homeowners who purchase and install a qualifying renewable energy system must

    take the maximum credit amount allowable for the tax year in which the system is installed. If the

    credit is not used entirely during the first year, the remaining amount may be carried over for the

    next five years.

NC GreenPower tax deduction

    NC GreenPower offers cleaner energy options for energy consumers in North Carolina. Working

    with independent renewable energy producers and the state’s electric utilities, the program offers

    electricity generated from sources such as the sun, wind, and organic matter. The program is

    “homegrown,” meaning that energy is produced in North Carolina for the state’s power supply. A

    $4/month contribution adds one block of 100 kilowatt-hours of renewable energy to the state’s

    power supply.

    Contributions are made monthly through customers’ electric bills and are passed in their entirety

    to NC GreenPower, which uses them to offset the higher costs of generating this type of

    electricity. All contributions are voluntary. Participation in the program is tax-deductible on federal

    income tax returns as a charitable contribution. More information is available at

Disclaimer: The North Carolina Cooperative Extension Service does not provide

    tax advice or preparation assistance. Contact a qualified tax professional for

     assistance in interpreting, preparing, and filing all tax returns. In addition, use of

    brand names in this publication does not imply endorsement of products or

    services named or criticism of similar ones not mentioned.

Additional resources:

    North American Insulation Manufacturers Association, Energy Star, Tax Incentives Assistance Project, Alliance to Save Energy, DSIRE Database for State Incentive for Renewable Energy


     North Carolina Solar Center,

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