It's that time of year where most of us receive our W2/1099 and start tallying up how many tax deductions we can utilize. Additionally, we're wrapping up the colder months that make us think it would be nice to have a more efficient home with a less expensive gas bill. Putting two and two together, it seems like a good time to get up to date on some current tax credit options moving forward in 2013.
Before moving forward, I will give you the same disclosure EnergyStar gives on their website. 1) I am not an accountant so please consultant with him/her before filing your taxes. 2) I am focusing on Energy-Efficient Credits. There are still Alternative-Energy Credits and plenty of local credits are also available. If this gets a good response, I'll write additional pieces on the other credits. Now let's dive in and get some money back in our pockets.
Energy Efficient Credits (IRC 25C):
Alright, so if you have already used your energy-efficient tax credit between 2006-2010, you are unfortunately ineligible for these. From my understanding, this would be all credits listed under Internal Revenue Code 25C if you really want to look into it with your accountant. Either way, that's for a later day. Here's the nuts and bolts of what is available in 2013. Again, this is not every credit available, but a guideline to a majority of the common ones.
The general rule is 10% of the cost, up to $500. However, many categories have specific caps (ex: maximum $200) or a set amount (ex: $100 credit) regardless of the cost. All work must be done on your principal place of residence.
Seven major categories are:
1. Biomass Stoves- Flat $300 credit if thermal efficiency rating of at least 75% is hit
2. HVAC- There are several different qualifiers here, including water boilers, central air units, heat pumps and furnaces. Each option has its own efficiency requirements and credits ranging from $50-$300.
3. Insulation- Insulation rolls, blown in fiber, rigid boards, and expanding sprays all qualify. These products are 10% of the material cost, do not include labor, and cap out at $500. This is true whether you do the work yourself or hire a professional.
On a side note, this is probably one of the easiest/cheapest ways to increase efficiency in your home. It's something you can do yourself (if you're somewhat handy and don't mind getting a little dirty) or hire a professional for a minimal cost compared to other home improvement projects. The majority of current homes are under-insulated when compared to new construction building codes. Since utility costs go up from year-to-year, over time we unnecessarily shovel more money to the utility companies. There are numerous articles and studies from credible sources such as the Environmental Protection Agency, United States Department of Energy and EnergyStar quoting savings of 20% or more on this subject. Feel free to research them online or contact me for the articles directly.... Alright, back to the other sections of the credit.
4. Air Sealing Products - Weatherstripping, spray foam, caulk designed for air sealing, and house wrap all apply here. Like the items listed under #3, these products are 10% of the material cost, do not include labor, and cap out at $500.
Keep in mind that even if you don't buy any of these components for your typical Saturday fixer-upper, bigger projects (like a siding job) will use these one or several of these items. Don't forget your credit if applicable!
5. Roofs - All metal roofs with the right amount of pigmented coating and all asphalt shingles with cooling granules that meet the specific EnergyStar requirement. Just like items #3 and #4, this credit is 10% of the material cost and caps out at $500.
The pigments in certain metal roofs exhibit high IR-reflectivity for a given visible color. This allows for the manufacture of colored metal roofs that can now meet the tax credit. As for the asphalt shingles, many manufacturers have produced an architectural shingle (usually in a white or other light color) that meet the requirement. Every manufacturer has different offerings so ask your roofer which shingles will qualify.
6. Water Heaters- This includes gas, oil, propane and electric heaters. Gas, oil and propane heaters need an energy factor ≥ .82 while the electric water heater needs to be ≥ 2.0 to obtain the flat $300 credit. Solar water heaters do not qualify for this credit as they have a separate alternative-energy credit.
7. Windows- All energy-efficient windows, doors and skylights qualify. You'll receive 10% of the material cost, no labor, and it maxes out at $500. The exception is windows cap out at $200 (Why not $500???) This one gets a little tricky, but here's a few guidelines for the Chicagoland area:
-Windows with a U-Factor ≤ .30 will qualify
-Skylights with at U-Factor ≤ .55 will qualify
-Doors have different U-Factor requirements depending on how much glass is in the door. Consult with your door agent to know which options will hit the credit
Again, this is not every credit available, just what qualifies under IRC 25C. If there is interest, I will write about local options and the alternative-energy (lot of solar options here!) IRC 25D options.
I am also not an accountant, but just a contractor trying to pass on educational information so you don't lose out on potential 2013 credits. If you are an accountant or fellow contractor who knows more about your specific field (I know nothing about HVAC) please speak up and add your valuable information in the comments so everyone can benefit from these tax credits. All of the information I posted comes from www.energystar.gov.