American homeowners who made energy-efficient home improvements in 2012 will be pleased to know that the federal government would like to reward their efforts. The American Taxpayer Relief Act, enacted January 2, reinstated a tax credit available for home energy improvements. The credit is set at a maximum of $500, which may be disappointing to some since a credit of up to three times that amount was available in previous tax years. Also, the $500 credit is a lifetime maximum credit amount, meaning that homeowners who have previously earned this much in tax credits for energy improvements cannot claim more of these credits on their 2012 tax returns.
The home energy tax credit policy posits several stipulations for eligibility. Energy upgrades must have been made to the homeowner’s primary place of residence. In addition, the credit only applies to improvements made to an existing home – self-built energy-efficient homes do not qualify. December 31, 2012 is the cutoff date for upgrades. Any improvements that were still in progress after this date will not qualify for tax credit eligibility. When calculating your available credit, you can include the installation costs of regular water heaters and air-conditioning and heating units but not those of windows, doors, roofs, skylights, or insulation. Keep in mind that this tax credit is nonrefundable – it can be used to cut down the amount of any tax bill but it is not available in the form of a tax refund.
Homeowners that made more significant energy improvements may be eligible for a larger tax credit. A 30% credit is available to those who installed solar water heaters, geothermal heat pumps, solar energy devices, or fuel cells. While fuel cells need to have been installed in a principal residence, the credit will apply to the other systems even if they were installed in secondary homes.