Several tax incentives were extended and changed through the American Taxpayer Relief Act of 2012, also known as the “fiscal cliff bill,” which passed Tuesday, Jan. 1, 2013. The residential tax incentives for existing homes, including purchases made in 2012, were extended through 2013. These incentives apply to:
- Windows, insulation, air sealing homes and duct sealing
- Air conditioners, heat pumps, furnaces and water heaters
There were also two incentives that were both extend and changed. The new homes credit provides an incentive to builders for new homes that reduce energy use relative to the IECC-2006 building code by at least 50%. This is a change from prior law that used the IECC-2003 as a base. The appliance credit provides an incentive to manufacturers for increased production of very-efficient refrigerators, clothes washers and dishwashers. These credits had several efficiency tiers in 2011; for 2012-2013, the higher tiers remain but the lowest (least efficient) tiers for clothes washers and dishwashers ended.
This means you can get a one-time federal tax credit for up to $500 when you install energy-saving windows, doors, insulation, roofing material, non-solar water heaters, or heating, ventilating, and air conditioning systems in your home.
To qualify, these items must be “placed in service“ through December 31, 2013 and include a Manufacturer Certification Statement, which is a signed statement from the manufacturer that the item qualifies for the tax credit.
The tax credit must be taken in the tax year that the item was placed in service. In other words, if you made an improvement in 2012, you can’t take a credit for it in 2013. The maximum tax credit for 2013 is $500 and the $500 maximum applies to all items combined. Since the credit is 10% of what you spend, you’ll need to spend $5,000 to “max out” the credit.
If you had your windows updated last year (2012) be sure to take advantage of this great incentive. If you’re thinking about having your windows this year, there couldn’t be a better time!