EXPERT AVAILABLE: Changes in Energy Tax Credits May Be a Surprise, MU Tax Expert Says

March 20th, 2012

By Brad Fischer

COLUMBIA, Mo. – Since 2005, Americans have benefitted from income tax credits promoting energy efficiency. However, a University of Missouri tax expert says those credits have changed recently, which could lead to a surprise for some filers.

“Some energy efficiency-related credits have decreased or disappeared altogether,” said Andrew Zumwalt, an associate state specialist for financial planning and a member of the University of Missouri Extension faculty. “People need to be aware of these changes to the tax code so they can properly evaluate the costs and options they have when it comes to improving their homes.”

The Non-Business Energy Property Credit, which was enacted in 2005, gave filers a 30 percent tax credit for the cost of energy-efficient home improvements, such as a new furnace or insulated windows. However, in 2011, the credit decreased to 10 percent of improvement costs with a $500 limit placed on the credit. In 2012, the credit is no longer in place.

“This has come to a surprise to many people,” Zumwalt said. “It also surprises people that not every energy-efficient improvement is eligible for the credit. For example, an energy efficient dishwasher may lower utility costs, but it has no impact on your taxes. Typically, eligible improvements involve only heating and cooling of a home.”

Zumwalt says people who want to improve their home’s energy efficiency may still be able to benefit during tax season. The Residential Energy Efficiency Property Credit provides a 30 percent income tax credit on large improvements, such as installing solar panels, fuel cells or wind turbines. Labor costs of installation for these improvements also are eligible for the tax credit.

For assistance with tax filings, Zumwalt recommends the Volunteer Income Tax Assistance (VITA) program, a statewide, IRS-sponsored initiative to provide free tax preparation assistance for low- to moderate income-level homes. Trained community volunteers may help with special credits, such as Earned Income Tax Credit, Child Tax Credit, and Credit for the Elderly or the Disabled. In addition to free tax return preparation assistance, most sites also offer free electronic filing.

To find an MU Extension-run VITA site in the Columbia area, visit:  http://extension.missouri.edu/hes/taxed/vitasites.htm