If your home needs sprucing up, there's a catch-all $500 tax credit in the fiscal cliff deal
that could help blunt the cost of a remodel.
There was something in the Fiscal Cliff deal for everyone, some more than others. If you're feeling the squeeze from the two percent hike in social security taxes, and would like to get some of that money back, it may be time to consider a green upgrade to your home. The American Taxpayer Relief Act includes up to $500 in tax credits for certain energy-efficient home upgrades. The credit is retroactive to 2012, so if your project qualifies, you could even get some money back for last year's work.
You could get a credit against your tax bill for 10 percent of the cost of materials for insulation, exterior windows and doors that meet Energy Star standards, and certain roofing materials (metal roofs with pigmented coating, or asphalt roofs with cooling granules).
According to Forbes, here is how it works:
So if the cost is $5,000, you get the full $500 credit, except for windows, which have a sublimit of $200. Also eligible towards the $500 maximum credit are: central air conditioners ($300), heat pumps ($300), furnaces ($150) and even corn-fueled stoves ($300). A tax credit reduces your tax bill dollar for dollar, so you're basically getting $500 towards your remodel of $5,000 or more courtesy of Uncle Sam. You claim it on Form 5696 when you file your tax return.
One big caveat: the $500 credit is the maximum you can claim for all energy efficient home improvements since 2006. So, if you've already taken the $500 credit, you can't take any more. But, if you haven't used your credit yet, or haven't used all of it, you can still let Uncle Sam help pay to make your home more energy efficient.
While we're on the subject, don't forget that until 2016, homeowners who install solar, geothermal, or wind systems to generate electricity, or in some cases heat water, are eligible for a tax credit worth 30% of the cost of the system, with no upper dollar limit. There also is a tax credit for installation of a fuel cell system to generate electricity. That credit is for up to 30% of the cost, up to $500 per kilowatt of power generated. This credit is also due to expire in 2016. Learn more about those credits on the Energy Star website.