The Fiscal Cliff is behind us, an agreement to avoid the cliff was codified in the American Taxpayer Relief Act (ATRA). Among the golden nuggets within ATRA were the extensions of particular tax credits relating to Energy-Efficient Improvements to your home to help you save more of your hard-earned money.

First, let’s look at the improvements that qualify, starting with the items that fall under the Residential Energy Efficient Property Credit:

• Solar Electric (i.e. Photovoltaic Panels)
• Solar Water Heating
• Small Wind Energy (Windmills)
• Geothermal Heat Pumps.
• Fuel Cells

Expenses for the above items are applicable to either your main home or your vacation home, with fuel cell being the single exception, main home only.  In addition fuel cells are limited to 30% of cost up to $500.

A 30% credit is available for any or all of the above improvements whether they are added to an existing home or at the time of construction of a new home. Keep in mind the difference between a Tax Credit and a Tax Deduction. Put simply, the tax credit is like a cash discount on the item purchased. Drop $10,000 on a solar panel installation, and Uncle Sam hands you back $3000 tax credit. Additional rebates are available on a state-by-state basis. To learn more about the benefits your state offers, the Database of State Incentives for Renewables & Efficiency, funded by the Department of Energy, will help you find the details. These credits are currently scheduled to be available through 2016.

The next group of improvements fall under The Nonbusiness Energy Property Credit. This tax credit is more limited than the Residential Energy Efficient Property Credit. It’s capped at a $500 credit total for all years from 2005 through 2013. It includes expenses for the following qualified energy efficiency improvements:

• Insulation or any system designed to reduce heat loss
• Exterior Doors
• A metal roof designed to reflect heat
• Exterior Windows

The next category of credit worthy items are residential energy property costs. These include:

• Central Air Conditioners
• Gas, propane, or oil furnaces and qualified natural gas, propane, or hot water boilers.
• Advanced main circulating fans for the systems included in this group.

You don’t need to worry about which types of purchases apply to a given credit.  TurboTax figures out which tax credit your eligible for. Back in 2010, I was finishing my basement, and part of the process was to have professionals install solid foam insulation against the foundation.

Of course, I had been saving all my receipts for material as I went along as this would be added to my home’s cost basis, but what a pleasant surprise I had while working on my return for the year. TurboTax asked me if I had these expenses and gave me the appropriate tax credit and put $1500 back in my pocket.

Daylight Savings Time is here and you can save money by using less electricity, but if you made energy efficient improvements don’t forget to have your receipts ready when you prepare your taxes so you can take these tax credits and save more green this tax season.

The Non-business Energy Property Credits are scheduled to last through 2013, so if you’ve not taken advantage of these and used up your potential credits, you might consider doing so this year. You’ll get a bit of a tax refund and the chance to save on your energy bills in the years to come.

What Is The Residential Energy Tax Credit?

It’s a tax credit given by the IRS to reward homeowners for making eligible energy-saving improvements to their principal residences.   A tax credit directly increases your refund or reduces your tax liability. A principal residence is a home that you own and live in most of the time.

Home improvements eligible for the credit are:

•    Biomass stoves, heating, ventilating, air conditioning, water heaters, and installation costs for these items.

•    The costs of windows, skylights, energy-efficient doors, insulation, and certain roofs also qualify for the credit.

Another related credit available to taxpayers is the Residential Energy Efficient Property Credit.  This tax credit remains unchanged for 2011 and covers qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.

How Did the Residential Energy Tax Credit Change in 2011?

In 2010, the Residential Energy Tax Credit was 30% of the cost of eligible energy saving home improvements up to $1,500, but now the credit is considerably lower as follows:

•    10% up to $500 for insulation, roofs, and doors

•    Windows capped at $200, but must meet ENERGY STAR qualifications

•    Furnace and boilers capped at $150

•    $50 for advanced main air circulating fan

•    $300 for air conditioners, air source heat pumps, water heaters, and Biomass stoves

•    $500 lifetime limit. If you received over $500 in these tax credits from 2006-2010, you are not eligible for anything more.

Most Common Reasons You May Not Receive the Tax Credit You’re Expecting

1.    Appliances such as refrigerators, dishwashers, washers, and dryers are not eligible for the credit even if they carry the Energy Star label.  Your state may have a rebate program for these types of appliances.  Check with your individual state online.

2.    The energy credit is a non-refundable credit.  Non-refundable tax credits are tax credits that cannot be more than your tax liability.  For example, if your tax liability is $250, you will not be eligible for a tax credit greater than $250.

3.    Beginning January 1, 2011, there is a $500 lifetime limit on the tax credit, so if you already received energy efficiency tax credits from 2006-2010 that counts toward the limit and it can’t go over the new limit of $500.

Claiming the Residential Energy Tax Credit

If you took the steps to make your home green in 2011 and your purchases meet the new eligibility requirements, congratulations!  You can claim the credit on IRS Form 5695 and file it with your 2011 taxes.  Don’t worry about the calculations.  TurboTax guides you and follows IRS guidelines to calculate the correct energy tax credit based on your entries.  Make sure you save all of your receipts and the Manufacturer’s Certification Statement for your records.

Still trying to decide whether to make your home energy-efficient? Compare the cost of your energy-efficient improvement with what you will be saving in energy costs.  Also, make sure the product meets the new eligibility requirements according to the Manufacturer’s Certification Statement.  The Manufacturer’s Certification Statement certifies that the product qualifies for the tax credit.  Go to the Energy Star website for more information.  Haven’t filed your 2010 taxes yet? Check our Take the Chill Off blog for the 2010 residential energy tax credit law.

1. Add space. Converting a storage attic into a bedroom, building an entertainment deck, or finishing a musty basement is a smart way to add usable square footage to a home, which will increase its livability as well as its resale value. You can even add a second story, enlarge the garage or create an extra bathroom for a busy household. With many families sharing space with other family members or roommates, having more bedrooms and living space is a definite plus.

2. Increase curb appeal. Install a new front door with pizazz, redo an entry, landscape the front yard, paint the house or replace worn siding. All these projects spruce up your home and give the exterior a fresh appeal.

3. Remodel kitchen and baths. Up-to-date kitchens are always in demand, so replacing counter tops and appliances can add a great deal to the saleability of your home. Likewise, bathrooms can sparkle with new fixtures, flooring, paint and mirrors, at relatively little cost.

4. Save energy. Replacing windows and doors that leak and adding insulation will save heating and cooling costs. These improvements may also save tax dollars. For 2011, you can garner an income tax credit of up to $200 for Energy Star-qualified windows and skylights and up to $500 for Energy Star-qualified doors. Replace your water heater with a new efficient one, and you can receive up to $300 in credits. Furnace improvements and central air conditioning may yield tax credits of as much as $300. In most cases, the tax credit is 10% of the amount you spend, and the overall credit is limited to $500. To claim the energy tax credit, file Form 5695 with your 2011 tax return.

5. Go solar. Because they are so efficient, the government is offering a 30% tax credit for solar energy systems and geothermal heat pumps, as well as small wind turbines with no limit on the credit you can claim. This credit is available through 2016.

Homebuyers Credit

Amid the real estate bust, the First-time Homebuyers Credit gets a lot of buzz because it is tied to stimulating the economy. Many taxpayers may not be aware that it has been extended and expanded to include repeat homebuyers.

If you are a first-time homebuyer, the maximum credit amount you can receive is $8,000. You fit the bill if you have not owned a primary residence during the three years up to the date of purchase. In addition, there are income restrictions. The credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For Colin Kelly, a first-time buyer who was profiled in the New York Times, the credit means the difference between living with furniture found on the street and a real adult home. Kelly used the proceeds from his $8,000 credit to furnish his New York City apartment.

The long-time resident credit of up to $6,500 is much more obscure. To qualify, buyers must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

Keep in mind that there is lots of documentation involved if you want to receive these credits, which is why the IRS doesn’t let you e-file.

Energy Efficient Credits

It pays to be green. In fact, greening your home offers some great tax breaks.  Did you replace any windows?  Did you install a new air-conditioning system? Taxpayers who made energy-efficient improvements to their home may get a credit worth 30% of the cost, typically up to %1,500. Spend $1,000 on a draft-free door, for example, and receive $300 off your tax bill. Solar and geothermal improvements are even more lucrative. For a detailed breakdown of energy-related credits, check out this EnergyStar fact sheet.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) was designed to put more money into the pockets of working taxpayers. Yet millions of lower-income people miss out on reaping its benefits every year. In 2008, 24 million taxpayers claimed more than $48 billion in credits, which works out to an average of $2,000 per filer. However, 25% of taxpayers who are eligible for EITC fail to claim it, according to the IRS.

To get the credit, your income cannot exceed $13,440 if you are single and have no children. (The income threshold is $18,440 if you are married and filing with your spouse). If you fit the bill, you are eligible for a $457 credit.

The credit becomes more valuable if you have a larger family. It increases from $3,043 (one child) to $5,657 (three kids or more), But you cannot earn more than $43,279 if you are single and $48,279 if married and filing jointly with three or more qualifying kids.

Unemployment and Job Search Deductions

Unfortunately, many people lost jobs over the past year. The good news is that the first $2,400 of unemployment benefits received in 2009 are tax free.  Also, job search expenses could be tax-deductible for taxpayers who itemize. What kind of job-hunting items apply? Eligible expenses include the cost to print and mail your resume, fees paid to an employment or outplacement agency, travel costs associated with the job search.

But there’s a catch: Job-hunting costs are part of miscellaneous expenses reported on Schedule A of Form 1040. Only miscellaneous expenses that exceed 2% of your adjusted gross income are deductible.

Education Expenses

There are a slew of credits available for taxpayers in college, the trick is knowing which is the best one to take, along with knowing what you can deduct.

The American Opportunity Credit is an expansion of the Hope credit, and it is tied to the economic stimulus package. The income cap is higher, and the credit can be claimed for tuition and certain fees you pay for higher education in 2009 and 2010. It’s up worth up to $2,500 for qualified tuition and expenses. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two.

If you have brushed up on skills to help you get ahead in your career, use the Lifetime Learning Credit. It provides a credit of up to $2,000 to cover qualified education expenses, such as job training. And it is applicable for you, your spouse or your offspring. The credit is based on your income—joint filers can’t claim it if their income exceeds $120,000.

If you want to delve into the nuances of education-related credits, this Q&A from the IRS does a terrific job of explaining the differences.

Finally, for some other overlooked deductions, check out this list from the TurboTax Blog.  And remember, TurboTax makes it easy to get all the deductions and credits you deserve.

Getting discounts on purchases is always a nudging factor with my major purchases. Spend $10 more and get free shipping? Sure let me go find one more item. With that in mind it made me wonder: what other kind of discounts or tax credits could I get as well now that I am officially a home owner?

Plenty as it turns out, including a “cash for clunkers” appliances program.

A home “cash for clunkers” program is gearing up at the state level that could reduce the cost of buying certain Energy Star appliances. And although such appliances are a bit more expensive, the positives outweigh the negatives according to the U.S. Department of Energy – positives that include a drastic drop in the monthly bills.

The Wall Street Journal posted some great links and details on which products qualify for the Energy Star credit. Home Depot also has a link on their Web site that lists specific appliances that qualify.

Pays to Live Green also has tips on how to green your taxes including how to get 30 percent off the purchase of a new heating and cooling system, and a 30 percent tax credit on solar or wind energy systems.

For those families unable to afford purchasing appliances, in 1976 the U.S. Department of Energy’s Weatherization Assistance Program provided weatherization services to more than 6.2 million low-income families. Weatherization service providers install energy efficiency measures in the homes of qualifying homeowners free of charge.

The services include updated heating and cooling systems, and new electrical systems. The average expenditure limit is $6,500 per home. And while weatherization isn’t necessarily a tax credit, it still provides home upgrades that cost little to nothing for low-income families.

Well, our washing machine is on its last leg – it makes more noise than a plane landing during the spin cycle. So, I guess it is about time I start taking advantage of these other credits and programs. Especially before I come home and there is a washing machine shaped hole in my roof.

Want more? We’ve pulled together a few more tips on in this piece on the TurboTax site, which includes a more tips and tricks for energy-related home improvements you can benefit from. Here’s a selection, and visit the post for even more energy-related home improvements:

• Insulation
• Energy Star exterior doors and windows, including skylights
• New metal or asphalt roof with appropriate pigmented coatings or cooling granules

Which home improvements will you make in 2010?

Because it’s been several months since the act was first rolled out, I thought I’d revisit some specifics about the incentives, as well as any related deadlines. Hopefully you can find something here that applies to you and your particular situation.

Buy a Car: New Car Sales Tax Deduction

If you purchase a new car, light truck, motor home, or motorcycle you may be eligible for a federal tax deduction of the state and local taxes you pay on the new purchase. That probably amounts to around $2,000 in tax deduction for a $20,000 car. Depending on your tax bracket, you could save around $500 in taxes. The deduction phases out at certain income levels, and only applies to cars under $49,500. Deadline: Purchase the new vehicle by December 31, 2009

Economic Stimulus: The News Car Sales Tax Deduction

Buy a House: First-Time Homebuyer Credit

Probably the most discussed incentive found in the ARRA, the first-time homebuyer tax credit is a refundable credit applied to your 2009 tax liability. If you haven’t owned a home in the last three years can get a credit of up to $8,000 towards the purchase of a new home. The credit is phased out for certain income levels. This credit was recently extended. Initial Deadline: Close on the sale by November 30, 2009 ~ Extended Deadline: April 30, 2010 (for sales contract); June 30, 2010 (for closing)

Upgrade to a Better House: Long-Time Homebuyer Credit

President Obama just signed into law the Worker, Homeownership, and Business Assistance Act of 2009. This law extends the deadline created for the first-time homebuyer credit. It also creates a credit of up to $6,500 for current home owners to purchase a new home. You must have owned your current home for the past five years. The credit is phased out for certain income levels. Deadline: April 30, 2010 (for sales contract); June 30, 2010 (for closing)

Improve Your Current House: Home Energy Efficient Credits

The tax credit normally provided for energy efficient improvements to your home has been increased this year to “30 percent of the cost of all qualifying improvements”. Improvements that qualify include things like insulation, energy-efficient windows, and energy-efficient heating and AC units. Deadline: Place the improvements in service by December 31, 2010

Buy a Computer with College Savings: Certain Computer Technology Purchases Allowed for 529 Plans

You can now include computer equipment and Internet service in the cost of your child’s education when cashing out those 529 Plan funds. Deadline: Spend the 529 Plan funds by December 31, 2010

Go to College: Tax Credit for First Four Years of College

The stimulus created the American Opportunity Credit, which broadens coverage of the existing Hope Credit for years 2009 and 2010. This applies to only the first four years of college. The maximum annual credit of $2,500 is available for qualifying students. Income limits apply. Deadline: December 31, 2010

For more information about the tax incentives found in the ARRA, see the IRS Information Center.

Caution: Incentive Shouldn’t Always Equal Action

It’s important to point out that just because these incentives are available, you shouldn’t necessarily run out and buy something. Each purchase decision should be made carefully, and other factors (beyond tax incentives) should be considered.

Energy Efficient Improvments for the Home

If you’d like to lower your home heating bill this winter, the government has a hefty tax credit that could help.

By making certain improvements to your home, such as installing new, energy-efficient doors and windows or insulation, you could get a credit worth 30 percent of the cost. Spend $1,000 on a draft-free new front door, for example, and receive $300 off on your taxes.

For every dollar you spend on qualified improvements, you get 30 cents back. The improvements include hot water heaters, furnaces and circulating fans.

Basically, the government gives you money to help you save energy. And that helps you save money. It’s part of the 2009 economic stimulus plan.

What you need to know

There are a few rules, of course.

The credit can be taken in both 2009 and 2010, but the limit is $1,500 over both years.

The improvements must be to your primary home. They can include various energy-saving upgrades such as new hot water heaters, furnaces and circulating fans.

And, here’s the sticky part, they must meet certain energy-efficiency requirements. These are all spelled out at the government’s Energy Star web site.

Wind and solar production

If you’re feeling really ambitious, you could go for a much larger credit.

Instead of merely saving energy, you could start making your own renewable energy. You could get a 30 percent credit on the cost of installing small wind turbines, solar water heaters and solar panels.

This tax break is available through 2016 and there’s no dollar cap on the size of the credit. And, of course, the wind and the sun get thrown in for free.