Tax Breaks for 2016

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Having recently filed my Federal income taxes, I’m now thinking of ways I can pay the U.S. government less of my earnings next year. My guess is that a lot of you are thinking the same thing.

When it comes to home improvement, a number of tax credits for residential energy efficiency have been renewed for 2016. These tax credits are available for purchases made in 2016, as well as retroactive to purchases made in 2015, through the U.S. Environmental Protection Agency’s Energy Star program. Energy Star products are independently certified to save energy, save money and protect the environment. You’ll be able to easily identify them by the Energy Star logo prominently displayed on the product labels. Homeowners can use up to 30 percent less energy by outfitting their houses with these products, and pay less Federal tax to boot.

The following Energy Star upgrades earn a credit of 10 percent of the cost up to $500 (or a specific amount from $50-$300): biomass stoves, air-source heat pumps, central air conditioning, boilers, furnaces, insulation, roofs, water heaters, windows, doors and skylights. These credits apply if the upgrades are made to your existing home and your principal residence. (In other words, new construction and rentals don’t apply.)

You can deduct even more from your taxes by installing a geothermal heat pump, a solar energy system, or a small residential wind turbine. Each of these three energy-efficient systems earns a credit of 30 percent of its cost, with no upper limit. Plus, this applies to existing homes, new construction, principal homes and even secondary homes. Tough luck for folks who own rental properties, though; those don’t qualify.

So keep these figures in mind if any of the upgrades are on your to-do list for 2016. And hold onto those receipts, because they might be able to save you some major money when the next tax season rolls around.

 

— M. Weber

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