Home Improvement Tax Credits For Energy Efficient Products: Insulation, Windows, Heaters And More

Congress took action a few months back and extended energy efficiency tax credits for most homeowners through the end of 2010. If you’ve been looking to upgrade your water heater or windows and doors, you can probably get a tax credit in 2010.  Some of the less common of the tax credits for home improvements will be around all the way until 2016.   EnergyStar.gov explains:

If you purchase an energy-efficient product or renewable energy system for your home, you may be eligible for a federal tax credit. …

Please note, not all ENERGY STAR qualified products qualify for a tax credit. ENERGY STAR distinguishes energy efficient products which, although they may cost more to purchase than standard models, will pay you back in lower energy bills within a reasonable amount of time, without a tax credit

Energy Tax Credit Is Extended Through 12/31/2010

So how much is the tax credit, and what do you need to do to get it?

Example: So how does the tax credit work?  For a qualifying upgrade, the tax credit is 30% of the covered cost up to a $1500 total credit. For instance, if you pay $3000 for a central air conditioning system (excluding installation costs), your credit would be $900, as long as it was bought and paid for by 12/31/2010.

The house must be your principal residence and the credits don’t apply to new construction. Other, upgrade-specific restrictions apply, so see the government site for details.

What Products Are Eligible For The Energy Efficiency Tax Credit?

A variety of products are eligible for the tax credit, however, you need to be careful that your specific product is eligible.  Some of the products include:

• Energy efficient doors and windows.  Installation costs are not eligible for the credit. Other restrictions apply.
• Water Heaters. Credit includes installation costs; some restrictions for energy efficiency apply.
• HVAC components, including advanced air handlers, air force heat pumps, central A/C units, boilers, propane, and gas furnaces. Tax credits include installation costs.
• Insulation, whether spray foam, fiberglass, or blow-in cellulose, they’re all covered so long as they meet IECC requirements. Installation cost is NOT covered.
• Biomass Stoves.
• Metal and asphalt roofs. Credit doesn’t include installation costs.

Some of the tax credits will take into account installation costs, while other credits do not.  It really does depend upon what you're claiming the credit on.  To find out if your product is a part of the credit, and whether you can include installation costs, check out the government website here.

What Do I Do To Get The Tax Credit?

To claim the energy efficient products tax credit, you’ll need to claim the credit on your 2010 taxes.  To claim it the product would have to be placed in service in 2010.

To claim the credit submit IRS Tax Form 5695 with your taxes.

Frequently Asked Questions (FAQ) About The Tax Credit

Here are the answers to a few of the most frequently asked questions about the credit.

• Is the $1,500 tax credit available for each product? Can I get $1,500 for windows and another $1,500 for a new HVAC system? Can I get $1,500 in 2009 and another $1,500 in 2010? Can two people living in the same home both get the $1,500 credit? Even if you purchase multiple products you can only get a maximum of $1,500 over the 2-year period (2009 & 2010). Basically you can spend up to $5,000 during this 2 year period on a single or multiple products, for your principal residence that you own and live in, and get 30% or $1,500 (30% of $5,000 = $1,500) back as a tax credit. If you get the entire $1,500 credit in 2009, then you can’t get anything additional in 2010. (Note: the maximum does not apply to all products)
• Can the energy efficiency tax credit be carried over to future years? The tax credit for products at 30% up to $1,500 cannot be carried over to future years.  But you can take part of the $1,500 in 2009, and the rest in 2010.  A few select products that are not subject to the $1500 limit can be carried forward. Find details here.
• Is there an income limit on the tax credit? No, there is no upper or lower limit on the credit, however, these energy efficiency tax credits are technically “non-refundable.” If you don’t pay any taxes, then you can’t get the credit.   Details here.

Are you planning on installing insulation, windows or other eligible product and will you claim the credit?  Do you think the credit makes it worth it to install a new energy efficient product, or will you still hold off?  Tell us your thoughts in the comments!