Did you go green in 2015? You might be able to get more money back as you’re filing your taxes this year.
Congress just renewed the previously expired Residential Energy Efficiency Tax Credit, which means any qualified efficiency updates you made in the last year are eligible for credits when filing your taxes.
If you haven’t upgraded yet, but are thinking about it, there’s still time to cash in on the tax breaks. Initially expired in 2014, the efficiency tax credit has been retroactively renewed from January 1, 2015 through December 31, 2016.
The tax credit breaks down into 10 percent of the total cost, up to $500, or a specified amount between $50 and $300 for all qualifying products. The only stipulations are, the updates must be on an existing home, the property must be your principal residence, and you can only claim this credit once during your lifetime.
What’s that mean for you as the consumer? Less money out of your pocket on taxes, lower energy bills and a better quality product in your house.
The credit is subtracted directly from your tax liability – the total amount of federal income tax you are responsible for paying at the end of the year – dollar-for-dollar, and holds the same value for all taxpayers with tax liability at least equal to the credit.
Say your Adjusted Gross Income is $50,000 and your tax liability, before any credits are applied, is $10,000. Over the year, you’ve had $12,200 withheld from your paychecks. In this situation, you could claim up to $10,000 in tax credits. If you are eligible for, say, a $300 tax credit, then your tax liability (that $10,000) would be reduced to $9,700. Since you already had the $12,200 withheld, you’d get a refund of $2,500 ($12,200 – $9,700 = $2,500).
In another example, if your AGI was $50,000 and your tax liability was $10,000 and you had withheld $9,500 from your paychecks, you’d still have the ability to claim up to $10,000 in credits. If you’re eligible for a $300 tax credit, your tax liability (still that $10,000) would be reduced to $9,700 and you’d reduce what you owe the government down to $200 at the end of the year ($9,700 in tax liability – $9,500 in already paid taxes that were withheld).
The Residential Energy Efficiency Tax Credit is slated to expire at the end of this year, though, so if you’re on the fence to make the efficiency updates, like installing a new HVAC system which could earn you up to $500 in tax credits, now’s the time to do it to cash in on the program.
We know that this whole subject may be confusing, so if you are still unclear about which form you may need or how to go about claiming this credit, please consult your tax advisor!
Call Blind & Sons today for more details on how you can earn this credit AND upgrade your comfort level!