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Hot temps, cool tax breaks

By Kay Bell · Bankrate.com
Thursday, July 12, 2012
Posted: 3 pm ET

Hot enough for you? Unless you live in Pacific Northwest, your answer is a most definite yes!

This has been the warmest first half of a year (January to June 2012) on record for the U.S. mainland, according to the National Oceanic and Atmospheric Administration National Climatic Data Center's "State of the Climate: National Overview for June 2012" report.

Only Washington state was spared during the first half of this year. Every other mainland state recorded warmer-than-average temperatures during those six months. In June alone, 173 all-time high temperature records were tied or broken.

If you did some work in 2011 to make your home more energy efficient, you're probably appreciating the effort right now. I hope you also claimed the upgrades on your 2011 tax return, where they could have provided you with a residential energy improvement tax credit of up to $500.

What? You forgot to claim the costs of storm windows or added insulation? It might be worth filing an amended tax return because the energy tax break is a credit, meaning it lowers your tax bill dollar for dollar.

If, however, you waited until this year to get a new air conditioner, you're out of tax credit luck. Most home energy improvements are no longer eligible for the tax benefit.

But wait. I said most. You might be able to get another energy upgrade tax credit if you're willing to spend more for a qualifying alternative energy system.

In these cases, things such as solar water heaters, solar home electric units, fuel cell plans, certain wind energy systems and qualified geothermal heat pumps could help reduce your utility and tax bills.

The big catch here is that these systems cost a lot more than your traditional AC unit. To encourage people to invest in them, the tax code offers a tax credit of up to 30 percent of the cost, including installation, of these alternative energy options.

Just can't swing solar panels or a mini wind farm this year? That's OK. These tax credits are in effect through 2016.

Helping out the sweltering

If your home is in good hot weather shape, consider helping someone who isn't as comfortable.

Here in Austin an eldercare organization holds an annual fan drive for older folks and low-income families who don't have or can't afford a fan or air-conditioning. I suspect that nonprofits nationwide have similar programs to provide relief to their sweltering residents.

When fan drives or similar heat assistance efforts are conducted by a qualified charity, your donation to the project can be a tax deduction if you itemize. That's cool for you and the people you help out with your charitable contribution.

Stay on top of tax news and tips that can help you cut your state and federal tax bills by subscribing to Bankrate's free Weekly Tax Tip newsletter.

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