by Michael Bohigian CPA
Upgrading your personal residence from ineffective and old to efficient and modern is no cheap proposition. Fortunately, the IRS and some states, in particular Massachusetts, kick in a number of incentives in the way of tax credits to help defray the upfront cost.
Since the IRS energy-efficiency credits are expansive and worthy of an article unto themselves, we’ll focus on the three Massachusetts credits available to taxpayers with residences in state.
The health hazards of lead exposure, especially for families with young children, is a great reason to de-lead your property, but the cost for full compliance can be hefty.
The good news is that Massachusetts does provide a Lead Pain Removal Tax Credit that can be up for the $1,500 for full compliance and $500 for interim compliance. To get the credit, you must attach a letter of Full Compliance or Letter of Interim Control from your licensed inspector to your tax return. It is worth noting that non-residents and part-year residents do qualify for this credit as long as the property is in state.
As a side note, Massachusetts isn’t the only New England state that offers a credit for de-leading. Rhode Island’s policy is even more generous. The Lead Paint Credit for residents of The Ocean State can be up to $5,000 for abatement/mitigation per dwelling and up to $1,500 for reduction/mitigation.
You’ll need to complete a Schedule LP to claim this tax credit.
Cesspool or Septic Systems
A failing septic tank can really ruin a dinner party. To this end, Massachusetts provides up to a $6,000 tax credit in the aggregate to taxpayers who repair or replace their failed cesspool or septic system in an owner-occupied residence. The credit is calculated at 40% of actual costs, up to a maximum cost of $15,000.
Some additional notes about the credit:
- The maximum credit you can take in any one year cannot exceed $1,500, so any additional credit can be carried over for up to five years.
- The credit is only claimable after the work is finished.
- Any subsidies from MA must be subtracted out of the credit amount taken.
You’ll need to complete a Schedule SC to claim this tax credit.
Solar & Wind
Supplementing the ample solar and wind credits offered by the IRS, Massachusetts offers an additional credit of 15% of the cost (up to a $1,000 credit on up $6,667 of costs) for the implementation of a solar or wind system that heats, cools, or provides hot water to a principal residence in state. The residence must be owner-occupied and a person’s principal residence.
The IRS offers a sizable credit of 30% of the cost of equipment with no limitation. As a result, for the first $6,667 you spend on your solar/wind equipment (before the MA credit phases out), your combined federal/MA tax credit is at a whopping 45% of the cost. That’s certainly something to shine a light on.
You’ll need to complete a Schedule EC to claim this tax credit.
Your State Rules
Most states have their own version of rules like these. Check with your tax preparer who should be familiar with your home state’s rules, and opportunities to reduce your taxes.