Sunday, April 27, 2014

Solar-Powered Savings Come With A Catch

There's the usual fare at the home show, including the headset-clad chef, the pushy pools guys, and the timeshare people who lure buyers with free candy.

Then there are the energy booths, offering everything from solar panels to window treatments. They have the latest and greatest in cutting your electric bill. Plus, they say Uncle Sam will help pick up the tab.

And they're right.

"For the consumer, it's a win-win," said Greg Otero, whose company sells the solar-powered Solar Star Attic fan. The Solar Star sucks hot air out of your attic and helps cool the living are of your home, Otero said.

To help hawk his wares, Otero's booth is adorned with red, white, and blue graphics that boast about a 30 percent tax savings.

"You're getting almost a third of the cost of the product back at the end of the year," he said.

Residential Energy Credits are part of the IRS code. Form 5695 outlines the savings. And yes, you can save big money.

(PRINT THE FORM:,-Residential-Energy-Credits)

But wait. Please continue reading for a warning.

As with most things that involve the Internal Revenue Service, there is a catch to form 5695. And tax preparer Bibi Rudestedt was kind enough to warn me about it.

Rudestedt says she's fielding complaints from customers who are spending thousands on energy improvements, but receiving zero in benefits.


"Lots of people," she said. "They were very upset."

How's that happen? Rudestedt explains that the tax credit is limited to the tax you owe. And that limitation pinches some consumers.

Say you spend $10,000 on something like solar panels. You'd expect a $3,000 credit -- that's 30 percent.

But Rudestedt says that if your tax liability is (say) $500, that's your maximum credit. $500, not $3,000, no matter how much you spend.

"You don't get more," she said.

So, before you spend the first penny thinking you will get a tax break, pause for a moment, and get some professional advice.

"I recommend that they go to their tax professional," Rudestedt said.

It could save you thousands of dollars and weeks of heartache.


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