Home energy efficient tax saving credit which is actually legally named as The Residential Energy (Efficient) Property Credit is revived on December 20, 2019, when President Trump signed Appropriations Act of 2020, that retroactively extended this law that expired after 2017.
The Residential Energy (Efficient) Property Credit, introduced in 2006, applies to improvements to the taxpayer’s existing primary home to make it more energy-efficient. The maximum credit a taxpayer can claim under this provision ranges from $500 to $1,500. Currently, the tax credit percentage is 10%, with a lifetime credit amount limited to $500.
The taxpayers who claimed the maximum credit amount in the past won’t be eligible for any additional credit under Home energy-efficient tax-saving credit relief. In other words, if you have ever claimed home energy saving credit between 2006 to 2017, you must reduce any credit currently claimed, limited to the $500, by any credit amount you claimed in any prior year.
Types of energy-saving improvements allowed for claim
Here is a list of expenditure that meets certain Energy Star requirements and on which you can claim credit @ 10% of the cost
- An advanced main air-circulating fan;
- A natural gas, propane, or oil furnace;
- A natural gas, propane, or oil hot water boiler;
- Energy-efficient heat pumps;
- Energy-efficient water heaters;
- Energy-efficient central air conditioners;
- Metal roofs with appropriate pigmented coatings;
- Asphalt roofing with appropriate cooling granules;
- Exterior storm windows and skylights;
- Exterior storm doors; and
- Others not listed here.
What are other conditions?
In order to qualify for the efficient energy saving credit, the following additional conditions must be met
- the home must be the taxpayer’s primary residence
- The home must be located in the U.S.,
- The improvement must generally have a life of 5 years or more,
- The taxpayer should be the original user of the energy-saving equipment or improvement.
Other rules about energy saving credits
- The credit is non-refundable.
- There is no carryover provision, so any portion of the credit not used in the year when the credit is earned is lost.
- If you spent on following items, credits are limited as under :
- Qualified Windows and Skylights $200
- Qualified Advanced Main Air Circ. $50
- Qualified Hot Water Boilers $150
- Qualified Energy-Efficient Equip. $300
3 Important Points to Note
Whether you are able to claim credit or not, spending on efficient energy saving devices or improvements will increase the basis of your home.
Secondly, since the law passed is allowing credit retrospectively, you can amend your 2018 return and claim the credit for energy saving improvements of your home .
Thridly , Since this home energy saving credit has been extended through 2020, so you can also claim in 2020 provided $500 lifetime credit limit does not exceed.
Pl also read Gift Solar Electric & Claim Investment Tax Credit