Install New Water Heater Get IRS Tax Credit
Heating hot water in your home costs a lot of money, and can cost up to 25% of your electricity or gas bill. Installing a new efficient water heater can save you a lot of money over time. Water heaters that qualify for Energy Star certification can qualify for a tax credit of up to $300.
For the IRS, home repairs are considered a personal expense. You are not allowed to claim these expenses as tax deductions. However, if you install or make health-related home improvements, the IRS often allows you to claim these costs back as medical expenses. You also qualify for a tax credit when you install certain eligible energy-efficient home improvements.
Energy Star Lists Energy Saving Equipment Eligible For IRS Tax Credit
According to EnergyStar.gov, the IRS allows tax breaks for eligible repairs in five categories, one of which is non-solar water heaters. These water heaters can be powered by gas, propane or electricity, and include tankless water heaters. The tax credit is only available when you make eligible repairs to your primary residence located in the US, and will expire at the end of the year. To be eligible for the 2014 federal tax credit for a new water heater installed in your home, the equipment must have been installed in your home by December 31, 2013.
Eligible items include windows, doors, metal roofs, insulation, air conditioners, tankless water heaters, cars, solar water heaters, solar power and fuel cells. Check with EnergyStar for more details.
Additional Tax Rebates Available For Other Quality Home Improvements
You can also get your tax credit of up to $500 if you make certain eligible repairs to your home that increase your home’s energy efficiency. A tax credit is defined as money taken from the amount that the taxpayer must pay to the IRS. The tax credit is usually 10%, up to a total of $500, for purchasing and installing certain products such as new water heaters, central air conditioning, insulation, windows or roofs.
Under the old tax laws, homeowners could claim a limited tax credit of only 10 percent of the cost of the upgrade, up to a maximum of $500. Under the new tax law, taxpayers who spend $800 on a new efficient water heater, $1,000 on insulation, and $2,000 on windows can reduce their 2013 tax bill by $1,140. For more information, see IRS Form 5695, Housing Energy Credit.
Residential energy property loans are non-refundable. Non-refundable tax credits allow taxpayers to lower their tax liability to zero, but not below zero.
Free Help With Your Tax Return
The IRS has several places for taxpayers to get free help preparing their tax returns. The Volunteer Income Tax Assistance (VITA) program provides assistance to low-income communities, the elderly, people with disabilities, and taxpayers with limited English language skills. The Tax Counseling Program for the Elderly (TCE) helps taxpayers aged 60 years and over with their tax returns. Most VITA and TCE sites offer free electronic filing and an IRS certified volunteer will provide you with details on which credits and deductions are allowed in your particular case. Also, some VITA and TCE sites allow taxpayers to prepare their own returns with help from IRS-certified volunteers.
To find the nearest VITA or TCE site, use the VITA Locator Tool on IRS.gov, or call 1800-906-9887.
* Please consult a professional tax advisor, accountant or attorney for more information on taxes and tax credits.
* Saville Katz is Director of Content Creation and Syndication for Mr. Speedy Plumbing & Rooter Inc.