Additions and structural improvements (such as adding a garage or room, taking out interior walls, putting in new floors) are not a deductible expenditure and must be added to the cost of your house. However, some residential expenditures may qualify for the non-business residential energy credit on your federal income tax return and a deduction or credit on your state income tax return.

To claim the energy credit on your federal tax form use form 5695. These rules are for tax year 2012. They may qualify in 2013 any unused 2012 credits may be carried over to 2013, but you need to check the tax law or ask your tax return preparer when your 2013 return is prepared.

Qualifying Expenditures

A. 30% of the cost (which includes labor for on site preparation and installation), of water heating property, small wind energy property, geothermal heat pumps, solar water and house heating items (including solar panels as part of a roof). Amounts attributable to hot tubs and swimming pools do not qualify.

B. Other items and amounts: Read More