When it comes to figuring out how to fill out deductions forms when doing your taxes every year, the task can be overwhelming and daunting. The new buzzword for deductions these days is "energy-efficient," and many people are trying to take advantage of the tax breaks that the government is offering on these energy efficient appliances. However, not many people are aware that they are some restrictions on the types of energy-efficient appliances that can receive these tax breaks.
Read and understand the new legislation on deducting energy efficient appliances.
The new legislation on the 2005 Energy Policy Act indicates that taxpayers who invest in energy-efficient appliances can claim tax credits or deductions when doing their taxes for 2011. These tax breaks apply to certain energy-efficient appliances, not the typical appliances that most consumers are familiar with; which include refrigerators, clothes washers and dryers, and dishwashers. The new tax break applies only to energy-efficient appliances such as biomass stoves, solar panels and solar water heaters. The installation of these products must be at the main residence that you reside.
Obtain Form 5695 from the Internal Revenue Service website. Fill out Form 5695, which is called the Residential Energy Efficient Property Credit. In order to claim an appliance for a deduction in 2011, for example, the product must have been "placed in service" and used in 2011. There is an advisory notice on the IRS website that indicates Form 5695 is still in the draft version.
Obtain Form 1040. Taxpayers typically fill out Form 1040 when they want to deduct various items from their taxes. In this case, when you want to deduct energy-efficient appliances from your taxes, on line 52 of the 1040, you can claim or enter the amount of deduction taken from Form 5695. Although the only form you need with the 1040 form is Form 5695, it is important that you save all your receipts and manufacturers statements in case of an audit.
Things You'll Need
- Happy Living Magazine: Energy-Efficient Appliances and Tax Deduction
- 2011 Federal Tax Credits for Consumer Energy Efficiency
- Energy Star: Is There a Tax Credit for Corn, Pellet or Wood-Burning (Biomass) Stoves?
- Energy Star: How Do I Apply for the Tax Credit? What Tax Form Do I Need?
- Internal Revenue Service: Form 5695 (PDF)