As the days draw shorter and Daylight Savings Time draws to an end, we’re reminded that the end of the year is almost here.
As the temperature drops, you’ve probably already turned on the heat for the first time this winter (we just got our whole system serviced in preparation) and it’s time to start thinking about energy bills.
Winter is coming and you need to be prepared!
The good news about saving energy is that you can also save money at the same time — and see a tax benefit. A few years ago, we replaced all the windows in our home because they were falling apart and leaking.
We were able to leverage a tax credit to help defray the cost and reduce our energy bills. It was a win-win situation.
You want to do what you can to use less energy year round, but especially during the winter. There are a number of energy-saving ways to improve your home’s tax efficiency. Here are two of the tax breaks available for 2013:
Non-Business Energy Property Credit
Upgrading your primary residence with energy-saving improvements can mean a tax credit. This tax credit was originally set to expire at the end of 2011, but it has been extended through 2013. This means you have until the end of the year to make improvements if you want this credit (hurry!).
This tax credit allows you to claim 10% of the cost of certain energy-saving efforts, up to $500. The following items are included in this tax credit (verify that they meet certain energy-efficiency standards and are properly qualified):
- Water heaters
- Air conditioning and heating systems
Since this is a credit, you will receive a dollar-for-dollar reduction in the amount you owe on your taxes.
Residential Energy Efficient Property Credit
This is a tax credit that can be quite valuable. It is set to be active through 2016, so you have time to plan to take this credit.
You can receive 30 percent of the cost of alternative energy systems and equipment installed for your home. There is no limit on the credit, which means that you don’t have to worry about a cap. It won’t phase out with a higher income, either.
It’s important to note that this credit isn’t refundable, so you won’t get money back if the credit is worth more than what you owe. However, it is possible to carry the credit forward to the next year, so it isn’t wasted.
If you have a $2,000 credit, but only owe $1,500, you can apply the $1,500 this year, and then carry the remaining $500 forward, reducing your tax liability next year. Don’t worry. If you made any of these energy efficient home improvements, TurboTax will do the calculations for you.
Qualified systems include solar cells and panels, solar hot water heaters, wind turbines, and geothermal equipment. Any home you install these systems into qualifies; it doesn’t have to be your primary residence. Just make sure that you check to see if the system meets the requirements.
Daylight Savings Time was extended in an effort to save energy to some degree. With Daylight Savings Time coming to an end, you need to be prepared for higher costs.
One way to offset those higher costs is to make your home more energy efficient year-round. If you plan it right, your efforts to make your home more efficient can pay off with a tax credit.