If you didn’t get all your home improvements done in 2020, and you think you missed out on some valuable residential energy tax credits, you’re in luck. Some renewable energy tax credits were extended. Others are still available at a lower rate. Even better, some tax credits were retroactively extended back to 2018. That could mean money back on your 2018, 2019, 2020, and, in some cases, your 2021 income tax liability.
Energy tax credits are an incentive for homeowners and builders to make energy-efficient improvements or upgrades that use less energy and protect the environment. For example, ENERGY STAR certified products are independently certified to use up to 30% less energy. Less energy use means a lower energy bill. It could also mean your lowering your taxes.
Here are six tips about Residential Energy Tax Credits:
- Renewable energy tax credits are 22% of the cost for solar energy systems, fuel cells, small wind turbines, and geothermal heat pumps that are placed in service during 2021. Tax credit limits depend on the credit amount and your tax situation.
- Residential Energy Property Tax Credits have been retroactively extended for qualified improvements from December 31, 2017, through December 31, 2021. These credits are generally 10% of the cost, up to $500, or a specific amount from $50-$300, depending on the improvement.
- Improvements that qualify for the Residential Energy Property Tax Credit include qualified heat pumps, central air, boilers, furnaces, water heaters, circulating fans, and biomass stoves.
- Qualified energy efficiency improvements that also qualify for a residential energy credit include energy-efficient insulation, metal and asphalt roofing, windows, doors, and skylights. The credit does not include the installation cost.
- Energy credits apply to your newly-constructed or existing home that is used as your primary residence or your secondary home. These credits do not apply to rental properties.
- You can take advantage of retroactively-extended energy tax credits by amending your federal income tax return up to three years after the original filing deadline (e.g., April 15, 2021, for a 2017 income tax return originally due April 15, 2018).
Home improvements that save on your energy costs could also lower your tax liability. Not only could 2020 improvements qualify for a tax credit, some of the qualified home improvements you made in the last three years could lower your prior-year tax liability, too. Want to know more? Check out the ENERGY STAR website https://www.energystar.gov/about/federal_tax_credits.