CLOCK IS TICKING FOR $1,500 TAX CREDIT FOR ENERGY EFFICIENT IMPROVEMENTS MADE TO YOUR HOME

by Andrew D. Schwartz, CPA

You only have through December 31, 2010 to purchase energy efficient improvements for your home and qualify for a lucrative tax break.  The maximum credit is equal to 30% of the first $5,000 spent on high-efficiency heat pumps, air conditioners, and water heaters, or energy-efficient windows, doors, insulation materials, and certain roofs.  You can also claim the credit for certain types of asphalt roofs and stoves that burn biomass fuel.

Even if you claimed the $500 tax credit a few years back for energy efficient improvements made to your home, you can still claim the full $1,500 tax credit for 2009 and 2010 as long as you make $5,000 worth of qualified energy efficient expenditures during that two year period.

Please note that the new rules did increase the standards for an energy efficient purchase to qualify for this tax credit.  Check out the products listed at www.energystar.gov to see if the energy efficient purchases you made qualify for this tax credit.

Renewable Options

Thinking about adding solar, wind, or geothermal capabilities to your home? If so, you should be aware that The American Recovery and Reinvestment Act of 2009 also improved the tax credit for purchases of solar electric property, solar water heating property, wind energy property and geothermal heat pump property.  Under the prior rules, the tax credit you could claim for most of these items was capped at $2,000 per dwelling. 

As of January 1, 2009, these limits no longer apply.  Through 2016, you can take a tax credit equal to 30% of your expenditures for qualified solar, wind, or geothermal property.  Plus, you can claim the credit even if you add this energy producing property to a home that is not your primary residence.  According to IRS Notice 2009-41, "a qualifying dwelling unit is a dwelling unit that is located in the United States and is used as a residence by the taxpayer." 

Get Some Green for Going Green

To claim this tax credit, make sure to complete and attach a Form 5695 to your federal income tax return.  Plenty of good information about this expiring tax break can be found on the instructions of the Form 5695 which begin on page 3 of the pdf file.

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The IRS wants to remind you that if you receive an e-mail from a person or organization claiming to represent the IRS, then it's definitely a scam.  Here is what the IRS says about these types of e-mails:

The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it's a scam.

IRS impersonation schemes flourish throughout the year. These schemes may take place via phone, fax, Internet sites, social networking sites and particularly e-mail. 

Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicious code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site. 

Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they're accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.

For more information on scams and what to do if you're subject to one, see Online Scams that Impersonate the IRS, Suspicious e-Mails and Identity Theft and How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web Sites.

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2009 & 2010 TAX FACTS

• For 2009 and 2010, the standard deduction for a single individual is $5,700 and for a married couple is $11,400. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
• For 2009 and 2010, the personal exemption is $3,650. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  
• The maximum earnings subject to social security taxes is $106,800 for 2009 and 2010.
  
• The standard mileage rate is $.50 per business mile as of January 1, 2010, down from $.55 per mile for 2009.
  
• The maximum annual contribution into a 401(k) plan or a 403(b) plan is $16,500 in 2010. And if you'll be 50 or older by December 31st, you can contribute an extra $5,500 into your 401(k) or 403(b) account this year.
• The maximum annual contribution to your IRA is $5,000 for 2010.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2011 to make your 2010 IRA contributions. 

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