When it comes to taxes, we just have to deal with them as a necessary part of day to day life. After all, where would all of our public services come from if we all paid no tax?
So, contributing your share of taxes in some way helps the greater good. Of course, most of us still wouldn’t turn down an opportunity to legitimately lower our taxes, now would we? I didn’t think so.
Additionally, if you could lower your tax liability AND do something positive for the environment – might that be a win-win?
Well, if you have some purchases to make for your primary residence (as an owner of a pre-existing home), they might fall into the category of federal tax credits for energy efficiency. Based on your situation, you could get a tax credit of up to $500 for qualifying purchases.
Here’s an overview of the 2011 energy efficiency credits:
- Biomass Stoves: $300
- Advanced Main Air Circulating Fan: $50
- Air Source Heat Pumps: $300
- Central Air Conditioning: $300
- Gas, Propane, or Oil Hot Water Boiler: $150
- Natural Gas, Propane, or Oil Furnace: $150
- Insulation: 10% of cost, up to $500
- Roofs (Metal and Asphalt): 10% of cost, up to $500
- Water Heaters (non-solar)
- Gas, Oil, Propane Water Heater: $300
- Electric Heat Pump Water Heater: $300
- Windows, Doors, and Skylights: 10% of cost, up to $500, but windows limit is $200
The limit is $500, which is also a lifetime limit. If you took this credit in the 2006-2010 tax years, you’ve used it up. Also, it’s a one-time credit – you can’t buy something one year and keep claiming it year after year. The home must be your primary residence.
As you can see, there are some opportunities to save on taxes in 2011! The limit was reduced this year, as it had been $1,500 for 2010. However, despite being reduced, this credit still offers the opportunity to save money.
If you have a broader timeline, there are some tax credits for energy efficiency that expire in 2016:
- Geothermal Heat Pumps: 30% of cost, with no upper limit
- Small Wind Turbines (residential use): 30% of cost, with no upper limit
- Solar Energy Systems: 30% of cost, with no upper limit
- Fuel Cells: 30% of cost, up to $500 per 0.5 kW of power capacity
For complete details and requirements/restrictions (there are some), check out Energy Savers and consult with your own financial/tax professionals before making a purchase decision for these purposes.
Clearly, to summarize, there’s an opportunity to save some money on taxes and do well by the environment. And as we know, more money saved equals more money for retirement! Anyway, with respect to the tax credits in particular, they may not be to the level that existed prior to this year, as legislation has changed that, but there are still ways to participate and save money, which is a good thing!