If you’re like most of us, the chill that can result from cold, drafty windows is reason enough to invest in new panels for the home. And, if your water heater is so old it falls flat on its face after one hot water shower, you’re probably already thinking that it’s time to shop for a replacement.
But did you know that there are significant tax credits that can be earned if you upgrade certain parts of the home to maximize energy efficiency? The federal government continues to support clean energy production and responsible residential improvements that reduce energy consumption. If you’re curious as to how you can improve your home’s livability while also qualifying for a range of tax credits, read on.
Let’s look at some of the ways you can improve your home and save money with home improvement tax credits. This comprehensive homeowners’ guide provides an in-depth look at virtually all ways you can save money and improve your home. But let’s first begin with a high-level look at six of the best ways to reduce your tax liability and boost your home’s value:
1. Replace Your Roof: Many replacement roofs are tax deductible with the most common credit being a deduction amounting to 10% of the price of the roof, or up to $500.
2. Solar Energy Systems: The same tax credit exists for solar energy systems – a 10% or $500 deduction. File IRS form 5695 (Residential Energy Credits) with your federal return. Solar hot water heaters often qualify, too.
3. New Windows & Doors: Energy-efficient doors can trigger a tax credit of up to $500, and windows and skylights max out at $200. The cumulative tax credit for all doors, windows, and skylights is $500.
4. Insulate the Home: One of the most intelligent home improvement projects to complete – tax credit or not, is replacing or improving the insulation in the home – especially in an attic. The same IRS form 5695 can be used to itemize this deduction, which can reduce your tax liability by up to 10% of the cost of materials (installation is not included), with a cap at $500.
5. Central Air: Many of us feel the central air is absolutely vital in today’s modern homes, and it has been shown to add up to 10% to a home’s value, but did you also know it counts as a tax break? Replacing or installing a new central air unit can trigger a $300 tax deduction.
6. New Water Heater: You may have to replace this thing every ten years anyway, so why not do it before your old one officially dies to trigger a nice tax credit? Most modern replacement units fall within the Department of Energy’s guidelines, and that means a $300 home improvement tax credit for you.
Reducing your energy consumption and minimizing your tax liability can go a long way toward making your home more comfortable and keeping you in a better financial situation come tax time.
Disclaimer: If we’ve learned one thing about the federal government it is that programs and incentives can and do change over time. To ensure that you complete projects that DO qualify for the latest in tax incentives, make sure you visit either the IRS website on energy incentives for individuals or www.energy.gov before you begin.
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