Before you file and pay that income tax, first take a look at how to get a federal energy tax credit!
What’s a tax credit? – If you didn’t already know, a tax credit lowers the amount of tax that you have to pay. It is not a deduction or an exemption which reduces your taxable income; it is an amount that you subtract to the amount you owe to the IRS.
A Federal Energy Tax Credit is a tax credit you get for investing in making your home energy efficient.
So how does this tax credit work?
As a homeowner, there are two (2) types of residential energy tax credits available for you and these are: residential tax credit and nonbusiness tax credits.
You can claim a residential tax credit when you install energy saving equipment in your home, like solar panels, solar-powered water heaters and geothermal heat pumps. This tax credit covers solar, wind, geothermal and fuel cell technologies. Here’s how much you can claim as tax credit:
- 30% for changes made after December 31, 2016 and before January 1, 2020
- 26% for changes made after December 31, 2019 and before January 1, 2023
- 22% for changes made after December 31, 2022 and before January 1, 2024
Nonbusiness tax credit – Suppliers are required to provide materials or components that are energy compliant. So, if you made energy efficient improvements on your home by purchasing for home insulation, roof, exterior doors and windows – you can claim 10% of the cost as tax credit.
Please note that IRS requires that the property must meet the applicable standards required by law.
Contact us 1099 Accountant, your Accountant, for tax advisory and more on this tax credit. We’ll help you with the details.