NH Dream Homes Blog

Get Your 2010 Energy Tax Credits: Filing Tips for Form 5695

2011-02-10T11:42:00.001-05:00

By: Barbara Eisner Bayer

Published: January 27, 2011

Sidestep snares in the complex IRS Form 5695 to get all the 2010 energy tax credits you’ve got coming.

Fill out the right part of Form 5695

What type of system did you install? If it’s one of the following, complete Part 1 for Nonbusiness Energy Tax Credits.

Biomass stoves

Insulation

HVAC systems

Roofs

Non-solar water heaters

Windows, doors, skylights

Storm windows and doors

Max credit: 30% of the cost of the improvement, up to $1,500.

If you installed one of these souped-up systems, complete Part 2 for Residential Energy Efficient Property Credit.

Geothermal heat pumps

Residential wind turbines

Solar energy systems

Fuel cells

Max credit: 30% of the cost, with no limit except for a kilowatt limit on fuel cells.

What do I need on hand to fill out Form 5695?

Receipts that show the amount you spent. The feds won’t pay for installation for some items. For those, the receipts must separate out the labor so you can add just the cost.

Manufacturers’ certifications indicating that the improvements are eligible for the credit. Store them in a safe place in case the IRS asks for them in the future, but no need to file them with your return.

Coordinate with Form 1040 and other forms

For Part I, it’s pretty simple: Just enter the total of all this part’s credits (as shown on line 11) on Form 1040, line 52.

For Part II, it can get complicated because other credits, claimed on other forms, can affect the amount of your Part II credit.

If you need to fill out any of the following forms, have all the information needed to complete those at hand, because Form 5695, line 25, coordinates with all of them. (In fact, you’ll find it simplest to prepare all these forms more or less simultaneously.)

Form 1040—lines 47 through 50, which refer to other credits you may be eligible for

Publication 972—the child tax credit

Form 8369—mortgage interest credits you may have

Form 8859—tax credits applicable only to residents of the District of Columbia

Form 8834—electric vehicle credit

Form 8910—alternative motor vehicle credit

Form 8936—electric drive motor vehicle credit

Schedule R—care for the elderly or disabled

One form that’s irrelevant to completing 5695: Schedule A. That’s only for deductions, not credits. And you don’t even need to itemize to claim energy tax credits.

The pitfalls of Form 5695

You’ll find many places you can go wrong in both parts of the form:

Adding ineligible amounts into the form. Just because a product has an Energy Star label doesn’t mean it’s eligible for a credit. Check the details of what’s eligible for the credit and what’s not at Energy Star and make sure the product comes with a manufacturer’s certification.

Failing to keep track of this year’s energy tax credits for future years. Hang on to your tax credit paperwork (including receipts, certifications, and a copy of your completed Form 5695), because if you sell your house you’ll need to record the tax credit amount for tax purposes.

Say you bought your home for $100,000 (the basis) and sold it for $400,000. Your profit is $300,000. But by taking tax credits, you lower your basis, so when you sell the house, you increase your profit in the eyes of the IRS. If you’re in your home for a long time and it appreciates, you increase your chances of getting hit with capital gains. Still, there’s little cause to worry: The government gives married couples selling a home a free pass on up to $500,000 of profit.

Failing to file this form at all—or only partially. If you’re eligible for a lot of different tax credits, you can conceivably reduce your tax liability to zero. If that’s the case and you want to tack on the 2010 energy tax credit, you’re out of luck. The feds consider it nonrefundable. If it were a refundable tax credit, the IRS would write you a check.

Loophole only if you added a Part II improvement: You can carry the energy tax credit forward to 2011—or even beyond, at least as far as 2016. Even if you’re not eligible this year because you reduced your tax liability to zero, file Form 5695 anyway to make it easier to do the carryforward next year. Or just hold off installing that wind turbine until a year when you anticipate you’ll have fewer tax credits.

Forgetting certain credits that affect Part II—and vice-versa. Pay special attention to line 25: Certain other credits may ultimately affect your ability to fully claim Part II credits—just as Part II credits may affect other credits. Follow the line-by-line instructions in each form carefully. It’s easy to forget a number here.

Ack, I want help filling out Form 5695

If you find Form 5695 exasperating, you may be eligible for free tax preparation help from the:

Volunteer Income Tax Assistance Program

Tax Counseling for the Elderly

IRS at 800-829-1040.

Major tax preparation software, such as TurboTax, include this form in their packages.

Barbara Eisner Bayer has written about personal finance for the past 17 years. She works hard to translate IRSese into plain English. She has unbounded respect for CPAs.

DEADLINE FOR HOME BUYERS

2010-03-18T11:11:00.002-04:00

TIME IS RUNNING OUT....DON'T FORGET THE DEADLINE DATES FOR HOME BUYER TAX CREDIT!!!!

You will need to enter into a binding agreement by April 30, 2010 and close no later than June 30, 2010.

Check out my website at www.nhdreamhomes.com.

Sonya

NH Weatherization Program

2010-01-14T12:15:00.004-05:00

Hello Again,

Did anyone out there see NH Chronicle last week? Are you aware that there is a Federal Program that assists low income families with their home heating problems? Well, there is! The Department of Energy provides grants to the state to help people most vulnerable to high heating costs and who have little or no means of making their home a warmer and more energy-efficient place to live. If you meet the qualifying guidelines, you may be eligible to have your home inspected by professionals to help determine where heat is escaping and cold air is coming in. Once these areas are located, energy improvements are made to help lower the cost of heating your home and you can stop walking around in your coat, hat, and mittens!

If you would like to view the episode of NH Chronicle that discusses the State Weatherization Assistance Program, please visit my website at http://www.nhdreamhomes.com/ and click on the button labeled "Helpful Information" located on the left-hand side of the webpage.

For additional information about who is eligible, how to apply and who to contact, I have provided you with links to both the Federal and State websites.

NH State Program: http://www.nh.gov/oep/programs/weatherization/index.htm

Federal Program: http://apps1.eere.energy.gov/weatherization/

If you have any questions and/or comments, please contact me at Sonya@nhdreamhomes.com .

Stay Warm!

Sonya

2010 Home Buyer's Tax Credit

2010-01-04T09:46:00.012-05:00

Hello,

Just wanted to send out a reminder that in November, 2009, the First Time Home Buyer's Tax Credit deadline was extended and the qualifications were expanded. The information listed below is for purchases made AFTER November 6, 2009.

First-Time Home Buyer Credit: A First-Time Home Buyer is defined as a buyer who has not owned a primary residence during the three years up to the date of the new purchase. The first-time home buyer is eligible for a tax credit (maximum $8,000) if you enter into a binding agreement by April 30, 2010 and close no later than June 30, 2010.

Long-Term Resident Credit: A Long-Term Resident is defined as a buyer who has owned and used the same home as their principal or primary residence for at least 5 consecutive years of the eight-year period ending on the date of purchase of a new home as the primary residence (Wow! That's a mouthful). As a long-term resident, you could be eligible to receive a tax credit (maximum $6,500), as well. As with the First-Time Home Buyer Credit, you need to enter into a binding agreement by April 30, 2010 and close no later than June 30, 2010.

Members of the Military Who Qualify for the First-Time Home Buyer Credit or the Long-Term Resident Credit: Members of the military and certain federal employees living outside the U.S. have an additional year to purchase their primary residence. You will need to enter into a binding agreement by April 30, 2011 and close no later than June 30, 2011.

As with all tax credits there are rules and guidelines for eligibility. The first of which is Income Limits. Fortunately, those limits were increased for home buyers purchasing a home AFTER November 6, 2009.

Income Limits:

First-Time Home Buyers will be eligible for the full $8,000 credit and Long-Term Resident Buyers will be eligible for the full $6,500 if they meet the Modified Adjusted Gross Income (MAGI) guidelines. In order to qualify for the full tax credit, your (MAGI) cannot exceed $125,000 for an individual tax filer or $225,000 for joint tax filers.

Buyers with an (MAGI) that fall between $125,000-$145,000 (individual filer) or $225,000-$245,000 (joint filers) will be eligible for a reduced credit. Buyers with higher incomes do not qualify.

New Restrictions on Purchases Made After November 6, 2009:

1. Dependents cannot claim the tax credit.

2. Buyers are not eligible for the tax credit if the purchase price exceeds $800,000.

3. Buyer must be 18 years old on or before the date of purchase to qualify for the tax credit.

I hope this information has been helpful. I have provided you with the basic primary information about the Home Buyer's Tax Credit. For more information, I recommend you visit http://www.irs.gov/newsroom/article/0,,id=206294,00.html to view the IRS's page on various First-Time Home Buyer Credit Scenarios.

Now is the time! Make sure you take full advantage of this tax credit and start your home search today!

Please visit my website at: http://www.nhdreamhomes.com/

Happy Home Buying!

Sonya

Happy 2010!

2009-12-30T19:33:00.002-05:00

Hello,

Hope everyone has a Happy New Year!

Sonya