The tax credit does have a new life, however, reincarnated under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This was a replacement for the tax credit under the law that expired December 31, 2010.
Amounts have been reduced for the tax credit but you can still save your hard-earned money by making improvements before December 31, 2011. A visit to the ENERGY STAR site will list all the improvements eligible, which includes insulation and windows.
In order to qualify, the improvements must be made to your principal residence and not an office, new construction or rental home. But you can receive the credits if you add an addition to your home, so the windows in that sunroom that you’ve always wanted may qualify for the tax credits.
You do not need to replace all the windows in your home so you can still save by remodeling one room of the house. However, the windows must qualify under the ENERGY STAR program, you receive a credit of 10% of the cost capped at $200 for windows.
Insulation qualifies for up to $500 at 10% of the cost. Owens Corning AttiCat blown-in insulation is good to add for energy savings and is included in the program for your tax reduction. Products that reduce air leaks in the home can also qualify, as long as they come with a Manufacturers Certification Statement. Visit the ENERGY STAR site for a list of these products.
As noted on their web site, not all ENERGY STAR qualified products qualify for a tax credit. ENERGY STAR distinguishes energy efficient products which will pay you back in lower energy bills within a reasonable amount of time.Difference Between a Credit and AGI A tax accountant will explain that a credit is different than a deduction in that the credit adjusts the amount that is owed the Federal Government when filing taxes while the deduction is a line item that reduces the Adjusted Gross Income, or AGI.
In many ways the credit is more beneficial because it does reduce your tax liability directly and is not computed in the figure for your taxes through the AGI.
There are some limitations to the amount of tax credits. This is a change from the original bill authorized by Congress in the American Recovery and Reinvestment Act of 2009 that expired at the end of 2010. Any tax credits received in previous years will reduce the amount eligible under the new plan.How to File But the filing process remains the same for the new tax credit. You still need a receipt for the purchases with labor excluded, the Manufacturers Certification Statement, and IRS Form 5695 for the year that you are filing. The residential energy tax credit is claimed on line 52 of form 1040 for 2010 and 2011 filings. Keep the receipt and the statement in safekeeping but file Form 5695 with your taxes.
Improveit! customers can still download the manufacturer's certification for windows, doors, and insulation from the website to file for current and previous tax credits. They are available on the home page of this website.