Energy Tax Credits

Time tends to fly when you’re planning just about any home improvement, but when it comes to qualifying for energy tax credits, a very real deadline is approaching for energy efficient projects that can actually put money in your pocket at tax time, as they increase the value and efficiency of your home.

Installing efficient insulation, windows, doors, roofs and heating and cooling equipment in your current residence can earn energy tax credits through the end of 2010, so now’s the time to make improvements that’ll provide both tax savings and comfort year round.

What improvements qualify
There are several smart upgrades you can make that’ll easily add up to an energy tax credit, all of which must be made at your primary U.S. residence (condo and co-op improvements are apportioned to the owners; also, credit cannot be taken against the Alternative Minimum Tax).

  • Energy Tax CreditsInsulation: Insulation products, including sealing measures such as weatherstripping, caulking and foam sealants, are eligible for a credit of 30% percent of product cost (not including installation), up to $1,500.
  • Exterior windows, storm windows and skylights: Energy Star-labeled exterior windows and skylights are the smartest, surest purchase to qualify for a 30 percent of cost, exclusive of installation costs, of up to $1,500. Storm windows are eligible for the same amount, and must be accompanied by the Manufacturer’s Certification Statement (a signed statement certifying that the product or component qualifies for the tax credit).
  • Exterior doors and storm doors: Both varieties of doors qualify you for a credit of 30 percent of their cost, up to $1500 (again, installation costs don’t apply). Energy Star exterior doors will usually qualify, except for certain parts of California, and storm doors must meet specs through their installation in combination with a wood door assigned a default U-factor by the International Energy Conservation Code (IECC), and can’t exceed the default U-factor requirement assigned to such a combination. All doors should be accompanied by a Manufacturer’s Certification Statement.
  • Metal roofing: Look for roofing products with pigmented coatings that meet Energy Star reflective roofing requirements and are expected to last five years or are accompanied by a two-year warranty, and you’ll earn 30% of the materials cost in credit up to $1,500.
  • Central air conditioner, heat pump, or water heater: With qualifying systems, you can earn 30% of cost up to $1500 towards the full purchase price, including installation.
  • Solar water heating: Those who have truly gone green with their heating and cooling systems can now claim spending on their solar water heating system at 30 percent of cost for up to $2,000. All water for the system must be used in the home (swimming pools and hot tubs aren’t included), at least half the home’s energy must come from the sun, and the system must be certified by the Solar Rating and Certification Corporation (SRCC).
  • Furnace or boiler: These also qualify for up to 30% of their cost up to $1500 towards the full purchase price of the unit all including installation costs.

What to do at tax time
In addition to collecting any required Manufacturer’s Certification Statements, receipts and records related to product purchases and installation (including Energy Star window labels), to qualify for energy tax credits, you’ll need to file IRS Form 5695 with your taxes. Be sure to hold on to all documentation for future reference and proof of your purchases, and enjoy the year-round comfort and savings they provide!

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