Energy Efficiency Tax Credits for Your Home

Whether it’s buying a new hybrid car or switching out your old light bulbs with the new curly Q ones, there has been a lot of emphasis recently on “going green”. However, a new government initiative may have just upped the ante a bit. If you make energy saving changes to your primary residence, you’re no longer just “going green” but you also could be adding a little “green” to your wallet as well! As a part of the American Recovery and Reinvestment Act signed into law by President Obama in 2009, there are currently some tax credits that property owners can take advantage of by making their homes more energy efficient. These credits could potentially means thousands of dollars back in your pocket, not to mention the lower energy bills.

There are three different tax credits available to current homeowners. The first tax credit applies to purchases of Biomass Stoves, Heating, Ventilating, Air Conditioning (HVAC), Insulation, Roofs (Metal & Asphalt), Water Heaters (non-solar), Windows, and Doors. These upgrades must be made to an existing principal residence (i.e. landlords cannot get tax credits for rental properties they make more energy efficient.) The amount of the credit is 30% of the upgrade cost up to a maximum of $1,500 and it expires on December 31, 2010.

The second tax credit, which expires at the end of 2016, applies to purchases of geothermal heat pumps, small wind turbines (residential) and solar energy systems. Both existing principal residences and second homes qualify for this credit, as well as new construction (rental properties do not qualify). This credit is also 30% of the product cost, however there is NO upper limit like the previous credit.

The third and final tax credit applies to purchases of fuel cells (residential fuel cell and micro-turbine systems) and is once again 30% of the cost, up to $500 per .5 kW of power capacity. Existing homes & new construction qualify; however, they MUST be your principal residence. Rentals and second homes do not apply. This credit also expires on December 31, 2016.

To apply for the tax credit, you will need to file the appropriate form when you complete your tax returns. For products “placed in service” in 2009, you need to file the 2009 IRS Form 5695 and submit it with your 2009 taxes (by April 15, 2010). The residential energy tax credit is claimed on line 52 of the 1040 form. For all products “placed in service” in 2010, you will file the tax credit on your 2010 income taxes. Make sure you save all your receipts and the Manufacturer’s Certification Statement for your records & submit form 5695 along with your taxes. As always, make sure you consult your accountant ahead of time regarding any income tax related matters.

This is just a brief overview of the tax credits available. Each and every tax credit has its own specific set of rules and guidelines, and it’s highly recommended that you do your own research before making any permanent changes to your home. For the full list of products, and more tax credit information, please visit the government website @: http://www.energystar.gov