Stimulus bill offers energy tax breaks

By Ernie Brown

The American Recovery and Reinvestment Act is primarily set up by our government to kick-start our economy with large projects designed to create short- and long-term jobs.

But did you know the reinvestment act, better known as the stimulus bill, has some tax-break relief for folks who make their home or business more energy efficient?

I received an e-mail recently from Eric Erickson, media relations spokesman for the Internal Revenue Service for Ohio and West Virginia explaining how this can be done.

Now the IRS is among the most-feared letters in our vocabulary, but the following information may be able to save you a few dollars, and that’s always a good idea.

According to the IRS, the stimulus bill expanded two home-energy tax credits: the nonbusiness energy property credit and the residential energy-efficient property credit.

The nonbusiness energy property credit equals 30 percent of what a homeowner spends on eligible energy- saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years.

The cost of certain high- efficiency heating and air-conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items.

In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, certain insulation and roofs also qualifies for the credit, though the cost of installing these items does not count, according to the IRS.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, you can save as much as $1,500 on your 2009 federal income-tax return.

Due to limits based on tax liability, other credits claimed by a particular taxpayer, and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result, according to the IRS release.

That seems like a good deal, especially if you are thinking about installing new windows or a new water heater in your home before the end of this year.

The residential energy- efficient property credit is designed to spur investment in alternative-energy equipment.

The IRS says this credit equals 30 percent of what a homeowner spends on qualifying property such as solar-electric systems, solar water heaters, geothermal heat pumps and wind turbines.

Generally, labor costs are included when calculating this credit.

The federal government reminds you, however, that not all energy-efficient improvements qualify for these tax credits.

Therefore, Erickson says in the press release, homeowners are encouraged to check the manufacturer’s tax-credit certification statement before purchasing or installing any of the improvements.

The certification statement can usually be found on the manufacturer’s Web site or with the product packaging. And, normally, a homeowner can rely on this certification.

Uncle Sam cautions, however, that the manufacturer’s certification is different from the U.S. Department of Energy’s Energy Star label, and not all Energy Star-labeled products qualify for the tax credits.

Again, according to the IRS, eligible homeowners can claim both of these credits when they file their 2009 federal income tax return.

Because these are credits, not deductions, the credits increase your refund or reduce any income tax you may owe.

And you can claim these credits, regardless of whether you itemize your deductions on Schedule A.

You are to use Form 5695, Residential Energy Credits, to figure and claim these credits. A draft version of this form is available now on

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