Tax Tip: Generate Energy Credits for Clients

By Ken Berry
 
This is the fourth article in our series of tax return tips for 2011 returns. 
 
Are your clients "going green?" Besides doing their small part to save the planet, taxpayers can claim a residential energy credit for installing qualified energy-saving devices in the home. 
 
The main energy credit, which has been extended with modifications several times, technically expired on January 1, 2012, but it can still be claimed on a 2011 return.
 
The list of expenses covered by the residential energy credits includes the following:
  • Insulation materials
  • Exterior windows and skylights
  • Exterior doors
  • Central air conditioners
  • Natural gas, propane, and oil water heaters or furnaces
  • Hot water boilers
  • Electric heat pump water heaters
  • Certain metal roofs
  • Biomass stoves
  • Advanced main air circulating fans
Clients should be informed that the credit doesn't apply to refrigerators, dishwashers, washers, and dryers. In some cases, a state may provide a rebate program for these commonly used appliances.  
 
Note that a related credit is available for qualified solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. This credit extends through 2016.
 
How much is the residential energy credit? It's not as generous as it was in the past. For 2011 returns, the credit is equal to 10 percent of the taxpayer's qualified expenditures, up to a $500 lifetime limit. Previously, the credit was 30 percent of the cost of qualified expenses, up to a maximum of $1,500. In addition, the current credit for windows is capped at $200; furnaces and boilers at $150; air conditioners, air source heat pumps, and biomass stoves at $300; and advanced main air circulating fans at $50.
 
Finally, the maximum credit is reduced by residential energy credits from the prior two years. For instance, if a client claimed a $300 credit on his or her 2010 return, the maximum credit for 2011 is only $200.  


See the whole series of Ken Berry's tax tips for the 2012 filing season
  1. How to Secure an 'Extra' Dependency Exemption
  2. Choose the 'Biggest and Best' State Tax Deduction
  3. Lock in Mortgage Interest Deductions for Points
  4. Generate Energy Credits for Clients
  5. Dish Out Tax Rewards to Charitable Volunteers
  6. A Party at Home? That's (Deductible) Entertainment!
  7. Spell Out Tax Rules for Business Education
  8. Add on Medical Expenses for a Nondependent
  9. How Do You Spell Tax Relief? C-a-s-u-a-l-t-y Loss
  10. Expand the Reach of Dependent Care Credit


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