Peter and Angelina had owned their home for several years and wished to make some environmentally friendly upgrades. But they also wanted to reap any available tax benefits, so they visited their tax adviser.
She explained that, yes, there were a number of ways that they could make improvements that would reduce their environmental impact, lower their energy bills and save them some tax dollars.
Claiming a credit
The couple”™s adviser suggested they first make a list of the things around their home that needed improvement and see whether any of the upgrades might qualify for an energy-efficient tax credit. The credit will lower their tax bill dollar-for-dollar by 30 percent of the cost of eligible items, which include biomass stoves; heating, ventilating and air-conditioning equipment; insulation; metal and asphalt roofs; nonsolar water heaters; and windows and doors.
To meet the tax credit”™s eligibility requirements, any item that Peter and Angelina consider will have to meet certain standards. Helpfully, most manufacturers”™ certifications specify whether a product qualifies for the credit.
The adviser clarified that the total maximum the couple can claim is $1,500 ”“ and that limit is per household, not per appliance. It”™s not a per-year amount, either. So if they claimed $500 in 2009, they”™d be able to claim up to only $1,000 in 2010.
Also, their adviser noted that the credit applies only to their principal residence; they couldn”™t use it for a vacation home. Last, she mentioned that they needed to act fast, because the credit is set to expire at the end of 2010, though Congress may extend it.
Going big picture
Peter and Angelina”™s adviser next asked them just how ambitious they were about these upgrades. You see, she explained, another tax break is available for some “big picture” moves.
For instance, if they installed a geothermal heat pump, small wind turbine, solar water heater or solar energy system, they could claim a tax credit (which applies to either a principal residence or a vacation home) for 30 percent of the item”™s cost.
And if the couple decided to generate their own electricity, they could receive a credit of 30 percent of the cost of fuel cells, up to $500 per 0.5 kilowatts of power capacity. (This credit applies to only a principal residence.)
This has been a general discussion and is not intended as advice. As with any major decision, discuss your particular situation with a qualified adviser.
Norman G. Grill Jr. is managing partner of Grill & Partners L.L.C., certified public accountants and consultants with offices in Fairfield and Greenwich, Conn. Reach him at N.Grill@GRILL1.com.
