Feature Articles
Take credit for saving energy
Amanda Schad, Editorial Assistant,
Extension and Ag Information,
University of Missouri
If you have recently added energy-efficient improvements to your home, the payoff can be threefold. Energy-efficient items protect the environment and can save you money on utility bills. Now they can save you money on taxes as well, according to a University of Missouri Extension tax expert.
In 2005, President Bush signed the Energy Policy Act to offer tax credits on qualifying energy-efficient appliances, vehicles and home improvements. The tax credits apply to home items purchased and installed between Jan. 1, 2006 and Dec. 31, 2007. Other tax credits are available for solar panels, hybrid cars and cars that use alternative fuels.
“The federal tax credits for energy efficiency are meant to offset the cost of energy improvements and appliances,” said Andrew Zumwalt, an associate with MU Extension’s Voluntary Income Tax Assistance program.
“Credit is broken down into two types: residential energy property costs and qualified energy efficiency improvements,” Zumwalt said. “The efficiency improvements keep the heat in or keep the cool in. The property is what actually produces the heat or cool.”
Homeowners who have installed qualified improvements to their primary home, such as insulation, exterior windows or doors or a metal roof, can receive credit equal to 10 percent of the amount paid or incurred. Assembly or installation fees cannot be counted toward the credit amount.
Homeowners who have installed residential energy property, such as certain electric heat pumps, air conditioners and water heaters, qualified furnaces or hot water boilers, can receive credit for any costs incurred in 2006.
The total amount of credit available for these additions is limited to $500 for both 2006 and 2007.
To receive credit for an Energy Saver home improvement, homeowners should fill out IRS Form 5695.
“In addition to filling out the form correctly, you also need to be able to show receipts of purchase and either the Energy Star label or the manufacturer’s certification statement,” said Barbara Buffaloe, associate in the MU Housing and Environmental Design program.
Check the manufacturer’s Web site to see what specific documentation is required and whether you need to include the documentation with your taxes or just keep it on file, she said.
Even if the energy-saving device you were thinking of purchasing isn’t on the tax credit list, there are still benefits to owning it, Buffaloe said.
“With an energy-efficient appliance, there is an initial upfront cost,” she said. “But, the life-cycle cost savings, or savings from lower energy bills for the life of the appliance or improvement, will make up for it. Plus, if you plan to sell your home, you can promote those additions as an extra bonus.”
For more information, visit the Energy Star Web site at energystar.gov. For help with the form, call the IRS at 1-800-829-1040 or visit http://www.irs.gov/pub/irs-pdf/f5695.pdf.
Sources: Andrew Zumwalt,
573-884-1690;
Barbara Buffaloe, 573-882-3239
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Last update: Thursday, February 22, 2007
