Smart TaxesSmart Taxes

Tax break for energy-saving improvements is back

If you installed new windows or doors or made other qualifying improvements in 2012, you may be eligible for a tax credit. Or, you can make improvements this year.

By MSN Money Partner Feb 13, 2013 3:12PM

This post is by Kimberly Lankford of Kiplinger’s Personal Finance magazine.


The tax credit for energy-efficiency home improvements is back for 2012 and 2013. © REB Images, Blend Images, Getty ImagesThe fiscal cliff legislation, which Congress passed on New Year’s Day, revived the tax credit for energy-efficiency improvements for both 2012 and 2013. If you made any eligible improvements in 2012 -- after the credit expired -- dig up the receipts before you file your taxes for the year because you may get a tax break after all. These new rules should also be kept in mind when planning home improvements for 2013.


You can receive up to $500 in total tax credits for eligible home improvements you've made since 2006 (including a $200 limit for windows). If you claimed the full credit for home improvements since then, you won’t be able to take the break again.


If you are eligible, the tax break applies to 10% of the purchase price (not installation costs) of certain insulation materials, energy-efficient windows, external doors and skylights, and metal roofs with pigmented coating or asphalt roofs with cooling granules that meet Energy Star requirements (see the Environmental Protection Agency’s Energy Star website for details).


You can count both materials and labor costs for certain central air conditioners, biomass stoves, electric heat pumps or electric heat pump water heaters that meet specific energy-efficient guidelines -- up to a maximum of $300 for each. You can count up to $150 for an eligible natural gas, propane or oil furnace or hot water boiler.

The items must meet specific energy-efficient requirements to qualify. See the Alliance to Save Energy tax credit page and the Tax Incentives Assistance Project for details. Keep your receipts and manufacturer’s certification of eligibility.


Some alternative-energy improvements qualify for larger tax credits. For improvements made by December 31, 2016, you can take a credit worth 30% of the cost of buying and installing certain alternative energy equipment, such as geothermal heat pumps, solar water heaters, solar panels, fuel cells and small wind-energy systems.


For more information about these tax breaks, see IRS Form 5695 Residential Energy Credits.


If you don’t qualify for the federal incentives, see if you can get any state breaks. For links to details about programs in each state, see the American Council for an Energy-Efficient Economy site. For a list of several state and utility programs, see the Tax Incentives Assistance Project.


More from Kiplinger and MSN Money:





Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.