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Tuesday, April 12, 2011

Go Green, Save On Taxes

Go Green, Save On Taxes

by JR Hevron

Help the environment and save money on your taxes and your monthly expenses with qualifying energy efficient home improvements.

While it's too late to take advantage of tax credits for energy efficient home improvements in 2010, it's the perfect time to start planning for 2011.

This past December, Congress extended the Green Energy Efficient Tax relief through 2011. While the benefits are not as good as they were in 2010, they are still worth considering. Combine these federal tax credits with state tax credits, manufacturer's rebates, and discounts from appliance stores, and you'll be saving a whole lot more. And we haven't even mentioned the savings on home utilities, not to mention a house that is a lot more comfortable all year round.

Before we get to the actual savings, though, you should understand what a tax credit is. Unlike a deduction, which only takes away a percentage of the taxes that you pay, a tax deduction reduces your taxes dollar for dollar. Get a $500 tax credit and your taxes are reduced by $500.

If you didn't take advantage of the tax credits in 2010 or weren't able to, it's too bad because they were generous. You were allowed a credit for 30% of many energy efficiency projects up to $1500.

For 2011, the home improvement tax incentives are going back to the 2005-2008 levels. That's just 10% of the cost of adding insulation, replacing windows with higher efficiency models, replacing inefficient furnaces and air-conditioning systems, etc.. The cap is now $500 and if you have taken advantage of the program in the past in excess of $500, you have officially exhausted your tax credit. There are also caps for certain upgrades. For example, there is a $200 cap on adding more efficient windows and a $150-$200 cap on furnaces and boilers.

However, the tax credit for green energy systems for your home like solar panels, wind turbines, and geothermal heat pumps is still 30% AND there is no cap. This credit remains intact until December 31 , 2016.

How do you apply for these tax credits? File Form 5695 along with Form 1040. You should also attach your receipts along with a Manufacturer's Certification Statement.

If you've let 2010 slip by without making energy efficient improvements to your home, going green should be a priority in 2011. Not only will you help the environment, but you'll also cut monthly costs and save more on you taxes.

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