Efforts to stimulate the economy, including the Cash for Clunkers program that has provided incentives for retiring less fuel-efficient vehicles, have been in the news, yet lesser-known financial opportunities still exist.
Efforts to stimulate the economy, including the Cash for Clunkers program that has provided incentives for retiring less fuel-efficient vehicles, have been in the news, yet lesser-known financial opportunities still exist. They include cost-saving tax credits that also are part of the stimulus effort and can yield a taxsavings for taxpayers.The stimulus package, which is officially called the American Recovery and Reinvestment Act, is offering tax credits of up to 30 percent (with a maximum of $1,500) of the cost of installation for qualifying energy-efficient home improvements, said Bruce Snead, Kansas State University Research and Extension residential energy specialist.A tax credit is different than a tax deduction, Snead said. A qualified deduction can reduce taxable income; a tax credit reduces federal income tax by 100 percent of the credit.The goal, said Snead, is to encourage property owners to improve energy efficiency, which, in turn will lower their heating and cooling bills and reduce overall energy use.Qualifying taxpayers stand to benefit two ways. In addition to the savings from the tax credit, most also should benefit from long-term savings from reduced energy costs, he said.Qualifying improvements include updating heating and air conditioning systems, installation of insulation, energy-efficient windows, doors, skylights or water heaters placed in service after Feb. 17, 2009.While qualifying improvements generally carry an “Energy Star” label, the label alone is not enough to qualify for the tax benefit.Qualifying energy-efficient improvements also will need to exceed the energy-efficient standards applicable to the 2007 credit, Snead said.New, improved energy-efficient standards must be certified by the manufacturer and such certification must be available to the taxpayer either as part of the packaging or in an otherwise printable form.To qualify, energy-efficient improvements must be in use in the taxpayer's primary residence in the year the tax credit is claimed.To claim a 2009 tax credit, taxpayers will need to provide receipts for qualifying energy-efficient updates and a copy of the manufacturer's certification, and file IRS Form 5695 with their taxes.The tax credit initiative has been extended through Dec. 31, so taxpayers who have not yet moved forward with energy-efficient improvements can do so in the new year, the residential energy specialist said.More information about the tax incentives and potential savings is available at www.irs.gov, at county and district K-State Research and Extension offices, and on the Web site: www.engext.ksu.edu/home_energy.asp.