If you have a mortgage, you already know that one of the biggest tax breaks is being able to deduct the interest paid on your home loan. But did you know that certain energy-efficient home improvements may also be able to help you save on your tax bill by utilizing various tax credits for environmentally-friendly actions?
Nobody wants to pay any more than they have to come tax time. And Uncle Sam is willing to reward taxpayers who are looking to make energy efficient home improvements that can help reduce the size of their carbon footprint. It's called a Residential Energy Efficient Property tax credit.
A tax credit works by subtracting the credit allowed from the amount of tax that you owe, and is claimed when you file taxes for the previous year. However, because the tax laws and eligibility can change from year to year, be sure to check the IRS's Credit and Deductions guide and consult with your tax advisor for the list of available tax credits and qualification guidelines. If you've recently made improvements to your home, or are considering it, the following energy-saving improvements may result in one or more tax credit(s).
The Residential Energy Efficient Property Credit
Solar energy systemsInstalling a solar electric system can help reduce your energy costs. And if you live in a sunny part of the world and want to harness some of the sun's energy with one of these systems, you'll receive a 30 percent credit on both the cost of the purchase and installation. A credit is available through December, 2021.
Fuel cell systemA fuel cell system is a device that converts the chemical energy from stored fuel into electricity, reducing the amount of carbon dioxide in your home and your carbon footprint. The credit allowed is 30 percent of the cost to install a system in your primary residence, and up to $500 for each half kilowatt of power generating capacity.1 A credit is available through December, 2021.
Geothermal heat pump (GHP)A geothermal heat pump (GHP) taps into the earth's surface, using thermal energy that is found underground, in a pond, or in well water. It serves as a heat source in the winter and a heat “collector” in the summer, saving both energy and money. The tax credit is up to 30 percent of the cost of parts, labor, and installation. A credit is available through December, 2021.
Residential wind turbines
If you have enough wind in your area, a small wind turbine can be one of the most cost-effective home-based renewable energy systems -- with zero emissions and pollution. The tax credit is 30 percent of the cost of parts, labor, and installation, and can include your primary residence or a secondary home. A credit will be available through December, 2021.
Anything that helps the environment is a good thing for everyone. Check with your accountant or other qualified tax professional to see if you qualify for any of these energy-saving tax credits, or any others that may be available to you.