The push for more energy efficiency and the use of more ecologically friendly energy sources has been in full swing for the last couple of years. While many of the tax incentives meant to promote this trend have been directed towards businesses, not all of them have. In fact, if you have implemented green energy measures in your home or other properties that you own, you may well qualify for the Non-business Energy Property Credit or the Residential Energy Efficient Property Credit. In order to take advantage of these incentives and receive the credits, you have to include Form 5695 with your annual tax return.
The Non-business Energy Property Credit can allow you to deduct up to thirty percent of the cost of qualifying ecologically beneficial home improvements up to $1,500 for tax years 2009 or 2010. These improvements can include adding insulation, adding more energy efficient exterior windows and skylights, exterior doors, and treatments to metal roofs that reduce heat gain during the summer. The credit only applies to the cost of the actual material being added, not to the cost of onsite preparation and assembly. Further, if you received a credit or other incentive from your local utility company or state or local government, the amount you received from these sources has to be subtracted from the amount you can claim.
The Residential Energy Efficient Property Credit is akin to the Non-business Energy Property Credit in that it is limited to thirty percent of the actual cost of the improvements and has an upper limit of $1,500. This form 1040 credit can be applied if you have installed a number of energy efficient home improvements including, but not limited to: electric heat pumps, electric heat pump water heaters, natural gas or propane water heaters, biomass stoves, natural gas or propane furnaces, and certain types of air circulation fans. The exact specifics are included in the instructions for Form 5695 which can be found online. As is always the case with tax credits, they are very specifically applied to only particular improvements and you are expected to be able to document that any improvements claimed qualified accordingly.
