Tomorrow is the deadline to file your income tax statements for the 2024/2025 fiscal year. If you have not yet filed your taxes, you must make sure that you check to see if you qualify for any tax rebates or credits. This can save you hundreds and possibly thousands of dollars in taxes. While some tax credits are fairly well known, such as the Child Tax Credit, others are often underutilized by individuals despite qualifying to apply for them. Before you file tomorrow, check to see if you qualify for this $1,500 rebate.
Understanding tax rebates and credits
Understanding the qualifying criteria for the tax rebates and credits the Internal Revenue Service (IRS) offers is essential for you to lower your total tax liability. Importantly, you should also know the distinction between a tax credit and a tax rebate. While both reduce the total amount of taxes you owe the federal government, they operate slightly differently.
Tax credits reduce the amount of tax you owe directly dollar-for-dollar, which you can claim on your tax return. In addition, there are two main types: refundable credits, which can result in a refund even if you owe no tax, and non-refundable credits, which only reduce your tax liability to zero. Tax rebates, on the other hand, are tax refunds that are issued to you after you have filed and paid your taxes. These are often also in the form of stimulus payments issued by the federal government.
Claim this $1,500 tax credit before tomorrow
Before filing your taxes tomorrow, check to see if you qualify to apply for the Energy Efficient Home Improvement Tax Credit. This tax credit is specifically relevant for homeowners, particularly homeowners who spend a significant amount of their income on their energy bills. This is usually relevant for taxpayers who live in colder states. According to data collected by CNET, Hawaii has some of the highest energy bills in the country, while residents in North Dakota appear to spend the least on electricity out of all 50 states.
Recently, the federal government has introduced a $1,500 tax credit incentive to encourage citizens to upgrade their old water heaters. The reason for the tax credit is that water heaters can account for up to 20% of an individual’s energy bill. However, upgrading to heat pump water heaters (HPWHs) not only lowers the energy cost it takes to run a water heater, but they are also four times more efficient than older heaters.
Who qualifies for the $1,500 tax credit?
To claim the credit, make sure that you file Form 5695, Residential Energy Credits Part II, with your tax return. In addition, you must claim the credit for the tax year when the heater was installed in your home, not when the item was purchased. Known officially as the Energy Efficient Home Improvement Tax Credit, you can claim the credit for your heat pumps provided you meet the following criteria:
- The heater must have been installed after January 1, 2023
- Your home must be located in the US
- The home must be an existing one you are improving, and not a new property
- The home must be your primary residence
- Heat pumps must meet or exceed the CEE’s highest efficiency tier
Tax credits are a great opportunity for you to take advantage of. Most taxpayers qualify for at least some type of credit. If you need assistance to file your taxes and to check what credits you can claim, the IRS offers free resources through their website for you to consult. In addition, if you meet specific qualifying criteria, an IRS volunteer will help you file your taxes for free. If you anticipate that you will not be able to file before tomorrow, make sure that you apply for an extension.
