Congress enacted the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) which extends the income tax credit for certain energy-efficient home improvements and equipment purchases through 2016. That means you still have time to save both energy and taxes by making these eco-friendly investments. While the credit is nonrefundable, you can use it to offset both regular and alternative minimum tax.
The credit applies to expenses only for your principal residence and not a second home. It equals 10% of certain qualified improvement expenses plus 100% of certain other qualified equipment expenses, subject to a maximum lifetime credit of $500. Therefore, if you claimed any credits in earlier years, then you will only be eligible to claim additional credits in 2016 up to the lifetime maximum.
Improvement investments potentially eligible for the 10% of expense credit include:
- Insulation systems that reduce heat loss or gain,
- Metal and asphalt roofs with heat-reduction components that meet Energy Star requirements, and
- Exterior windows (including skylights) and doors that meet Energy Star requirements. These expenditures are subject to a separate $200 credit cap.
Equipment investments potentially eligible for the 100% of expense credit include:
- Qualified central air conditioners; electric heat pumps; electric heat pump water heaters; water heaters that run on natural gas, propane, or oil; and biomass fuel stoves used for heating or hot water, which are subject to a separate $300 credit cap.
- Qualified furnaces and hot water boilers that run on natural gas, propane or oil, which are subject to a separate $150 credit cap.
- Qualified main air circulating fans used in natural gas, propane and oil furnaces, which are subject to a separate $50 credit cap.
Manufacturer certifications required
When claiming the credit, you must keep with your tax records a certification from the manufacturer that the product qualifies. The certification may be found on the product packaging or the manufacturer’s website. Additional rules and limits apply. For more information about these and other green tax breaks for individuals, contact me at HZemel@berdonllp.com or your Berdon advisor.
Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.