Stan Harrison: Energy-efficient appliances, projects qualify for tax breaks

Stan.JPGStan Harrison
Didn't get a chance to tackle that energy-saving home improvement project last year?

Is that new gas furnace still awaiting installation?

Don't despair.

You'll still be eligible to receive a federal energy-efficiency tax credit next year. It just won't be worth as much.

But if the work was done in 2010, you could qualify for a tax credit this year of 30 percent of the cost up to $1,500 -- depending on the energy-savng appliance or improvement,

That's according to the Internal Revenue Service and Energy Star, an Environmental Protection Agency and Department of Energy program designed to encourage homeowners to adopt energy-efficient products and practices.

If any of the following were installed in your home, you could be eligible:

* A natural gas, propane or oil furnace.
* A natural gas, propane or oil water heater.
* Energy-efficient doors and storm doors.
* Energy efficient windows, storm windows and skylights.
* Insulation, including batts, rolls, blow-in fibers, rigid boards, pour-in-place, expanding foam spray, weatherstripping, caulk and house wrap.
* "Asphalt roofs with appropriate cooling granules" and "metal roofs with appropriate pigmented coatings" that meet Energy Star requirements.
* Central air conditioning.
* A biomass stove.
* An advanced main air circulating fan or blower motor that moves heat through ductwork.
* An air source heat pump.
* A gas, propane or oil hot-water boiler for home heating.
* An electric heat pump water heater.

To qualify, you must have your sales receipts and what's called a Manufacturer's Certification Statement for your records. A Manufacturer's Certification Statement is a signed statement from the manufacturer confirming that the product qualifies for the tax credit and usually can be found on the company's Web site. For your federal taxes, you'll need to file Form 5695.

The energy efficiency tax credits for these same items were extended on Dec. 17, 2010, when President Obama signed The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

But the act reduces the amount. Next year, you'll only be able to qualify for a credit of 10 percent of the cost up to $500, or on some items, a specific amount from $50 to $300.  

If you complete any of these projects by the end of this year, you'll qualify for a tax credit on next year's return at the lower rate. But don't dawdle. The energy efficiency tax credits are scheduled to expire on Dec. 31, 2011.

Credits expiring in 2016

For the following improvements, you have until Dec. 31, 2016, to qualify for a federal tax credit of 30 percent of the cost with no limit. These items apply to existing and new homes, as well as principal and second homes.

* A small wind turbine.
* A geothermal heat pump.
* Solar water heaters.
* Solar panels or a photovoltaic system to provide electricity.

You also could qualify for a 30 percent credit of up to $500 per 0.5 kw of power capacity for purchasing and installing a hydrogen fuel cell or microturbine system to power your home. A fuel cell system converts hydrogen into electricity. In a microturbine system, hot combustion gases spin a turbine connected to a generator, making electricity.

Michigan tax credits

Don't overlook your Michigan return. You could get a tax credit if you purchased and installed any of the following during 2010:

* Insulation
* A furnace
* A water heater
* Windows
* A refrigerator, clothes washer and/or dishwasher

The maximum state tax credit for each category is $75 as a single filer or $150 if filing jointly. All equipment must meet or exceed the Environmental Protection Agency's Energy Star criteria, and you're required to keep sales receipts and Energy Star rating information for your records. Limits on adjusted gross income apply. Submit Form 4764 with your Michigan return.

Electricity tax credit

Be sure to save those electric bills.

The push for renewable energy is behind a credit you can take on your Michigan income tax called the Energy Renewable Surcharge Credit.

Each month, residential electrical customers of Consumers Energy pay a renewable energy surcharge of $2.50. The surcharge is designed to help the utility pay for the cost of adding renewable energy sources, such as wind power, to its energy supply. Customers of DTE Energy pay $3 per month, and other electrical utilities are allowed to impose the surcharge as well.

The state allows a 20 percent tax credit on the surcharge for 2010. For Consumers Energy customers who paid the surcharge for 12 months, that amounts to a nonrefundable credit of $6.

It may not be much, but in a tight economy, every dollar can count.

Apply for the credit by completing line 10 of Schedule 2.

As with any tax matters, be sure to consult a tax adviser.


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