Save Energy and You Could Still Save on Your Taxes

Energy Star. If the name does not sound familiar, the related tax rule might: make major energy-efficient improvements to your home or business, and you may qualify for a tax credit. This is good news because a tax credit is better than a tax deduction. With a credit, money is taken directly off your taxes rather than your taxable income. And since the Energy Star program is not based on income, no matter how much you earn, you can take advantage of the program.

The bad news is, the list of qualifying equipment has been cut over the last few years.

Here’s the basic rule that still applies: install a geothermal heat pump, wind turbines or a solar-power system before the end of 2016 and you get a 30% credit. There is no limit to the credit, and the rule applies to existing homes, new construction, a principal residence or a second home. Rentals do not qualify.

Rule number two: while you can get a tax credit and reduce your taxes, you cannot get money back. For example, if you, prior to a credit, owe $200 and qualify for a tax credit of $300, the IRS will not send you the $100 difference. Rather, you may carry the remaining $100 forward to be applied to next year’s tax.

Rule number three: the tax credit must be taken in the tax year that the item was placed in service, and a Manufacturer Certification Statement must accompany the item to qualify. Exact specifications of qualifying materials can be found on the Energy Star website at http://www.energystar.gov/index.cfm?c=tax_credits.tx_index.

For many taxpayers, the reduction in the appliances and upgrades that qualify for tax credits is confusing and burdensome. To help, you can check if your gas or electric company offers rebates on items not eligible for a credit. For example, in Virginia, Washington Gas offers a limited number of rebates on programmable thermostats and certain natural gas furnaces. Details on their rebates can be found at: http://www.washingtongasliving.com/RebateProgram/FAQs.xml.

Myerson & Myerson, CPA’s can offer additional guidance on Energy Star’s current program, which has undergone so many changes in just the past few years. But it is worth the effort to find out if you qualify for the tax credit.

Contact Priscilla or Ed Myerson at (703)-753-1040 to set up a no cost, no obligation meeting to discuss your current tax situation.

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