Your home repairs may qualify for tax savings
As summer approaches and improvements around the house need tending to, remember there is still time to make some energy-saving improvements that could qualify for tax credits.
The American Taxpayer Relief Act of 2012 provides benefits to homeowners like you by extending the Credit for Nonbusiness Energy Property for 2012 and 2013.
The 2012 Taxpayer Relief Act does not modify the general requirements for the CNEP. The tax relief is a dollar-for-dollar savings off the taxes you would owe.
The CNEP can be taken when qualified energy efficient improvements or expenditures are made for your principal residence.
This includes new insulation; replacement windows, skylights and doors; central air conditioners; certain water heaters, furnaces or boilers; and a new metal or asphalt roof specially treated to reduce heat loss. The CNEP is extended for eligible property placed in service after Dec. 31, 2011, and before Jan. 1, 2014.
Also, there must be a reasonable expectation that the qualified energy efficiency improvements will remain in use for at least five years.
In order to qualify for the CNEP credit, the expenditures must meet certain energy standards, such as the Energy Star program.
For 2012 and 2013, the CNEP is equal to 10 percent of qualified energy efficiency improvements installed plus qualified residential energy property expenditures.
The maximum resident energy credit is equal to $500 after reduction by CNEP credits previously allowed after 2005.
Some expenditures are limited to a credit less than $500, such as exterior window and doors with a $200 maximum CNEP credit.
The CNEP is often confused with the Residential Energy Efficient Property credit, which was previously extended through 2016.
Both are energy credits available to homeowners; however, the REEP credit involves expenditures for solar electric property; solar water heating property; fuel cell power plants; small wind energy property; and geothermal heat pump property.
The REEP credit is available for existing homes and newly constructed homes, while the CNEP credit is only available for existing homes.
If you have installed energy-saving improvements to your home, a CPA can help you categorize your expenses and plan the timing of your energy-saving projects to maximize your overall tax savings.
Denise H. Seale, is a CPA in the firm of Silas Simmons, LLP of Natchez.