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Plug in energy credits on Form 1040

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in Small Business Tax

The tax extenders law passed in 2014—the Tax Increase Prevention Act (TIPA)—generated new life for a tax break for homeowners.

Strategy: Cash in on energy credits for qualified expenses. The credit is available for qualified expenses paid in 2014.

However, the provisions relating to the residential energy credit expired again on Dec. 31, 2014. It’s up to the 114th Congress as to whether or not they will be renewed for 2015.

At least individual taxpayers can claim a credit on 2014 returns for installing qualified energy-saving devices in the home. The list includes:

  • Insulation materials
  • Exterior windows and skylights
  • Exterior doors
  • Hot water boilers
  • Central air conditioners
  • Natural gas, propane and oil water heaters or furnaces
  • Electric heat pump water heaters
  • Certain metal roofs
  • Biomass stoves
  • Advanced main air circulating fans

In the current version, the residential energy credit is equal to 10% of qualified expenses, up to a lifetime maximum of $500. (In a prior reincarnation, the credit was 30% up to a maximum of $1,500.) Also, the current credit for windows is capped at $200; furnaces and boilers at $150; air conditioners, air source heat pumps and biomass stoves at $300; and advanced main air circulating fans at $50.

Tip: The maximum credit is reduced by residential energy credits claimed in prior years.

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