Liz Pulliam Weston: Tax breaks for saving energy; cars

The Basics

Get energy tax breaks while you can

You could buy energy-efficient products and get 30% of your cash back, but the deals may not last. A greener ride could qualify for a tax credit, too.

By Liz Pulliam Weston
MSN Money

Doing something nice for the planet can make you feel good. Simultaneously doing something nice for your wallet can make you feel even better.

Several tax breaks are designed to encourage people to save energy at home and on the road, but many of the incentives are set to expire, and it's uncertain whether Congress will extend them.

So if you're in a position to upgrade your house or your wheels, consider taking action soon.

The tax breaks include:

Energy efficiency at home

The nonbusiness energy property credit looks pretty simple at first glance: You get a credit equal to 30% of the cost of buying certain energy-efficient products, up to a lifetime cap of $1,500. (The cap means that if you took advantage of the tax break last year and got the maximum credit, you can't get any more benefit this year. If, however, you got a tax credit of $1,000 last year, you can still qualify for $500 this year.) To get that crecit, your project(s) must be completed by the time the credit expires Dec. 31, 2010; Congress extended the credit into 2011, but homeowners can only claim $500 -- and that's a lifetime tax credit, so if you've claimed the max of $500 since the end of 2005, you can't do it again.

The products that qualify include energy-saving windows, doors, insulation, metal and asphalt roofs, water heaters, biomass stoves, and heating and cooling equipment. But here's the rub: Not every product that proclaims itself "energy-saving" or "energy-efficient" will qualify.

"The standards are a little abstruse," said Mark Luscombe, a principal analyst at tax research company CCH. "Even if you read the law, it might not be obvious when you went to the hardware store which windows qualified and which didn't."

Luscombe, who recently had his home's roof replaced with a light-reflective version, dealt with the uncertainty by getting his contractor to write a letter testifying that the work qualified for the credit.

Another hiccup is that the cost of installation isn't always covered by the tax break. You can include installation costs for new heating and air-conditioning systems when figuring your credit, for example, but you can't include a professional installer's costs if you're putting in insulation.

Do-it-yourselfers should carefully review Energy Star's website for details on what qualifies for a break and what doesn't. Whether you hire help or not, you should ask for the manufacturer's certification statement that verifies the product qualifies for the tax credit.

To claim the credit, you'll need to submit Internal Revenue Service Form 5695 (.pdf) with the tax return that's due next April 15. Save all related receipts, the manufacturer's certification statement and any contractor certifications, in case you get audited.

You can get a different credit for installing solar energy systems, wind turbines, geothermal heat pumps and residential fuel-cell and microturbine systems. Known as the residential energy efficient property credit, the break equals 30% of the qualified costs with no cap. But you don't need to rush to claim it; the credit isn't set to expire until Dec. 31, 2016. The instructions with Form 5695 provide details.

In addition, your state may offer rebates for buying energy-efficient appliances. Many of these programs have ended, but not all.

Continued: Hybrid and alternative-fuel vehicles

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17Comments
9/28/2010 10:30 AM
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I went from a 10 SEER 2-ton heat pump to a 15 SEER this past March.  It's cooler, quieter, and cheaper to run - therefore, I can have it cooler than I did before and more comfortable with the Kentucky humidity in the summer. 

 

I can't think of anything that would use 35,000 watts in a residential setting, unless your heat pump has some insane auxiliary heat strips in it.

9/23/2010 7:05 PM
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if unemployed how do u pay for the work to get to the tax break!!
9/23/2010 9:03 AM
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Our furnace died last winter.  Our replacement options were $3,000, $4,000 & $5,000 with the two higher priced ones qualifying for  the rebates.  With the tax credits from the federal government and our state energy credits as well as a sale price, the $5,000 highest quality furnace will cost us less (state credit already rec'd, federal to be rec'd with 2010 taxes) than the $3,000 low efficiency furnace.  Our energy costs were less last winter than previously.  This program should continue.  Without the tax credits, financially, we would have had to choose the less efficient model.

9/18/2010 11:07 PM
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I would expect to see these incentives continuing for some time.

In the 70's I sold the Hot Water systems and they had a 70% tax credit. The 70% is a great incentive especially in today's economic environment. Those that have been able to hold onto their homes should consider these options.

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Gas Guzzler, I read all your comments and can see some valid points. I chose several years ago to do away with central air. Even the new energy star units are much more expensive than window units to run. With our 100 degree days here in texas, our family only uses the window units in our bedrooms at night and a single window unit for the living dining area during the day. If we leave the house, we set it to 85 degrees so the house won't be too hot when we return.

 

Our electric bills are minimal compared to the previous homeowners who paid $500-$700 a month for electricity. Our highest bill in the past 4 years is less than $300.

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I have been a tax preparer since 1990. When looking to purchase a Volkswagen Jetta TDI, the dealership talked about the rebate like it was a sure thing for everyone. I did the research at IRS.gov and found that we did not qualify. It gave me a valid point to use when working out the final price with them. They boosted the offer for our trade in to make up the difference.

 

We average about 48 mpg in our car. Diesel is a bit higher than gas now, but the savings are amazing. We get over 600 miles between fill ups. Since the commute for work and other travel is about 2200 miles a month, this is a huge savings in our budget.

 

I really appreciate this article. I am always looking for a way to trim how much we spend on utilities. Maybe our next purchase will be a wind turbine or solar panels.

 

 

9/18/2010 6:54 PM
9/18/2010 5:20 PM
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Why doesn't these offers let people know that it's not available for the retired persons or families, that don't have a income other than Social Security  or unemployment?
9/18/2010 3:56 PM
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Hey Gas Guzzler - you are either ill informed or an idiot, I'm not sure which.  The average home air conditioner for a single story, 2400 square foot home is a 4 ton unit.  A 4 ton unit is 48,000 BTU/Hr.  Doing the math, 48,000 BTU/Hr converted to watts is only 14,000 watts approximately.  Nowhere close to the 35,000 watts you erroneously keep spitting out.  The central air conditioning unit in most American's homes is nowhere close to 35,000 watts.  Get a clue.
9/18/2010 3:00 PM
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gas guzzlers,

You can make your point without all of your theatrics. You seem like an intelligent person. Make your point without all of the extra sarcasm and you will get more people to go along with your ideas and opinions. Tell them how you made your heater instead of seeing how much you can look down your nose at everyone. just a thought

9/18/2010 2:09 PM
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Check out Mill City Oregon... last Monday evening!

and wonder why the national media didn't pick up on this story?  More politics!

9/18/2010 11:58 AM
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@Lost Dollar

 Much of what you say works great and is certainly better than no action. Do bear in mind how things have changed since the days of clothes lines. Most new housing additions have incorporated in their covenants with owners that wonderful low-tech and "property value ruining" TV antennas and clotheslines are usually a no-no. Not to say you couldn't sneak the clothesline and pull it tight, then put the washing out to dry overnight when nobody would care when the wind is good.

9/15/2010 7:15 PM
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The chances of audit are very very very low, so pick any year, just one year not every year and just claim the credit that year.

Utilize your printer to create invoices for the expense. Match the false invoices to large check you have written to a vendor. You have now paid for a solar system and did not have to install one at all.

Obviously this is not legal, wrong, but so easy to do. The IRS auditors are ill trained, lazy, and overwhelmed. They are too busy auditing $8,000 housing credits.

This is what is wrong about any tax credit. 

End the tax credits. Stop picking winners and encouraging fraud.

I have just told you about the energy tax credits, now tell me about the resume killing Green job Obama got you.

Stop with the tax credits and let investments be judged by the best auditors, the purchasing public, who collectively can see through crap.

9/13/2010 11:04 AM
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Energy Tax Credits? I find it that homeowners are not taking up this cause, but then no one ever finds out why?

-Costs to renovate just to do acquire these technologies?

-Is the cost worth it?

 

This day in age, people could simply do a few of the following things that would make their home more efficient without spending lots of money:

-During the warmer months, hang your clothes out on the clothes line or hang them up inside your home on a Rack. You will give the Dryer a break.

-If you recycle, recycle aluminum cans or have your kids do it and deposit the monies into a bank account. It keeps your neighborhood beautiful.

-Set your thermostat to 75 degrees F during the Summer or open windows, and set it to 67 degrees F during the Winter.

-Wood burning Stove if you can, and that will offset Energy Bills during Winter.

-Use Crock Pots and Outdoor Grills for cooking and give your Stove a Rest.

-Install Ceiling Fans as a Source for both Heating and Cooling or use it in conjunction with an HVAC unit.

-Use blinds to control Sunlight coming in during the Summer, and open them up during the Winter.

-Use Shade Trees when possible around your perimeter property.

 

I understand the Technologies, and the Tax Credits, but the costs to the average Homeowner vs. the Tax Credit is not worth it, in my opinion.

9/13/2010 6:40 AM
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As usual complicate it to the point of absurdity so people will just not bother because they are frustrated..
9/11/2010 8:36 AM
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 give the everyday person the proper way to get these available monies  and follow up to make sure they were gotten
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