Residential Energy Property Tax Credit - What Homeowners and Builders Should Know

Homeowners can now make energy saving improvements to their homes and receive a tax credit up to ,500 when filing their 2009 income tax return.The American Recovery and Reinvestment Act which was enacted earlier in 2009 expanded this credit. If you spend ,000 before the end of the year, on eligible energy-saving improvements, you may be able to save as much as ,500 on your 2009 Federal income tax return.

The credit is equal to 30% of the cost of all qualifying improvements subject to maximum credit limit of ,500 claimed for 2009 and 2010(both years combined). The credit applies to improvements such as insulation, energy-efficient exterior windows and energy-efficient heating and air-conditioning systems. For additional information on qualifying improvements please visit the IRS website.

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To qualify as energy-efficient, the improvements are required to meet new standards that are more restrictive than the standards that existed in prior years. In addition, manufacturers are required to certify that the product meets the new standards by providing a written statement to that effect. In order to qualify for the credit, the improvement must be placed in service after December 31, 2008 but prior to January 1, 2011. The improvements must be made to the taxpayer's principal residence which must be located in the United States.

Taxpayers must claim the credit in the tax year in which the improvement is made by completing Form 5695.

Tax Tip - Some vendors may mislead you or there may be some confusion about the certification since the credit existed in prior years. For this reason, it is very important that you make sure the certification statement is for the 2009 credit rather than a credit from a prior year. A word of advice, since certain slow-moving energy-efficient products from last year may be marketed at closeout prices during the holiday season, it's critical to verify that you have purchased a current year product with the 2009 certification from the manufacturer in order to use the credit on your 2009 income tax return.

The tax credit can only be used if you have a tax liability and you cannot use it if you have no tax liability. You are now required to file a regular Form 1040 to use the credit. It is not available to 1040EZ and 1040A filers. So instead of filing Forms 1040EZ and 1040A you need to file Form 1040.

Due to other credits claimed by a taxpayer, limits based on tax liability and other factors, the actual savings may vary.To best determine if you qualify for this ,500 credit you should ask your accountant to help you make this determination.

Residential Energy Property Tax Credit - What Homeowners and Builders Should Know

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