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Take credit where credit is due


Another tax day has come and gone! Hopefully you took advantage of the HUGE federal tax credit for renewable energy.

A whopping 30 percent federal with no limit and 18 percent state with a $5,000 limit. The credit is set to expire at the end of 2016.

The average residential geothermal system costs $25,000

That’s a tax credit of $12,000. 

Another federal credit is the Non-business Energy Property Tax Credit. It's not as good as the renewable. You only get up to a maximum of $500 for all years combined. This credit covers things like adding insulation, better windows, or a high efficiency furnace.

Rod Olson, Financial Care Professionals, says three returns over the past several years out of 600 returns annually have filed for the renewable credit. However the credit on one was large enough to wipe out the entire federal tax and some left for the next year. On the other hand, one in twenty file for the nonbusiness tax credit.

Dan Schwarz of McGowen Hurst Clark & Smith in West Des Moines says “We don’t see people filing for the credit. Probably an opportunity more could take advantage.”

The Congressional Research Service reported in March of 2014 that nearly 12 percent of all tax returns filed in 2011 claimed the residential tax credit. Not surprising, those with adjusted gross incomes of more than $100k (less than 3% of all returns) filed for more than half of the credits. The total tax credit claimed was $1.6 billion.

You can reach me at rsmith@smithmetzger.com and let me know if you will go for a credit next year. Or do you think it should be pay as you go?

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