Solar panel installation is one project that will earn you a tax credit.
Making your home more energy efficient can be as complex as adding rooftop solar panels or as simple as installing more efficient appliances. Some energy efficient renovations can even earn you a discount on your taxes for the year you made the improvement. Projects for which you'll receive a federal tax credit include the installation of solar panels, new heating and cooling systems, specific windows and doors, certain types of insulation and a few other items. Although the process is not complex, you do need to save your receipts and follow all necessary steps to get your tax credit. Does this Spark an idea?
Instructions
Before the Project Begins
1. Look over the Energy Star website (see Resources below) for the current list of home projects that will earn you a tax credit. Each project is listed separately with pull-down menus to let you know how much of a credit you can receive, when the credit expires, and details about who can qualify.
2. Contact dealers and contractors in your area that sell and install energy efficient home improvement items. When scheduling installation, remember the project must be completed before the credit's expiration date.
3. Ask the contractor if he'll complete the appropriate paperwork or if you must do it yourself. Some contractors are quite familiar with the process of filing for tax credits and will do this for you as part of their service.
After the Project
4. Save all receipts from your project. You'll need proof of the project's cost if you're audited.
5. Fill out Internal Revenue Service (IRS) Form 5695. The numbers you enter will vary depending on how many and what type of projects you performed. The form's instructions will guide you through the process, but if you have questions, contact a tax adviser.
6. Enter the number at the end of the form (line 11) on Line 52 of your 1040 Tax Return. You must generally file a 1040 form to receive this credit. If you're a non-resident and use Form 1040NR, the number is entered on Line 49.
7. Complete your Form 1040. Sign the form and include a check if you owe tax. Mail the form and all necessary attachments--including Form 5695--to the correct IRS address listed on the 1040.
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