Energy Efficiency and Tax Credits

Homeowners who invest in making their home more energy efficient can take advantage of Tax Credits to save money now and continue to see their investment improve their lifestyle by keeping utility bills lower.

Federal Tax Credits for Energy Efficiency includes:

Tax Credits for Consumers:

Home Improvements

Tax credits are now available for home improvements:
  • must be “placed in service” from January 1, 2009 through December 31, 2010
  • must be for taxpayer’s principal residence
  • $1,500 is the maximum total amount that can be claimed for all products placed in service in 2009 & 2010 for most home improvements, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, fuel cells, and windmills which are not subject to this cap, and are in effect through 2016
  • must have a Manufacturer Certification Statement3 to qualify
  • for record keeping, save your receipts and the Manufacturer Certification Statement3
  • improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) — use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010
  • If you are building a new home, you can qualify for the tax credit for geothermal heat pumps, photovoltaics, solar water heaters, small wind systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters. More.

SUMMARY OF TAX CREDITS FOR HOMEOWNERS

Product Category Product Type Tax Credit Specification Tax Credit Notes
Windows & Doors Exterior Windows and Skylights U factor <= 0.30 SHGC <= 0.30 30% of cost, up to $1,5002 Not all ENERGY STAR labeled windows and skylights qualify for tax credit. More information
Storm Windows Meets IECC1 in combination with the exterior window over which it is installed, for the applicable climate zone 30% of cost, up to $1,5002 Manufacturer Certification Statement3 will list classes of exterior window (single pane, clear glass, double pane, low-E coating, etc.)4 that a product may be combined with to be eligible in specific climate zones.
Exterior Doors U factor <= 0.30 SHGC <= 0.30 30% of cost, up to $1,5002 Not all ENERGY STAR doors will qualify. More information
Storm Doors In combination with a wood door assigned a default U-factor by the IECC1, and does not exceed the default U-factor requirement assigned to such combination by the IECC 30% of cost, up to $1,5002
Roofing Metal Roofs, Asphalt Roofs ENERGY STAR qualified 30% of cost, up to $1,5002 All ENERGY STAR metal and asphalt roofs qualify for the tax credit. Must be expected to last 5 years OR have a 2 year warranty.
Insulation Insulation Meets 2009 IECC & Amendments 30% of cost, up to $1,5002 For insulation to qualify, its primary purpose must be to insulate. (example: vapor retarders are covered, insulated siding does not qualify). Must be expected to last 5 years OR have a 2 year warranty
HVAC Central A/C Split Systems: EER >=13 SEER >= 16 Package systems: EER >= 12 SEER >= 14 30% of cost, up to $1,5002 For a list of qualified products, go to the Consortium for Energy Efficiency product directory Exit ENERGY STAR, click on Air Conditioners, then in the “CEE Tier” enter “Residential Advanced Tier 3” for CAC Split Systems, and “Residential Tier 2” for CAC Package Systems and ASHPs. Note — not all ENERGY STAR products will qualify for the tax credit. View ENERGY STAR criteria.
Air Source Heat Pumps Split Systems: HSPF >= 8.5 EER >= 12.5 SEER >= 15 Package systems: HSPF >= 8 EER >= 12 SEER >= 14 30% of cost, up to $1,5002
Natural Gas or Propane Furnace AFUE >= 95 30% of cost, up to $1,5002 For a list of qualifying products go to the Gas Appliance Manufacturing Association Exit ENERGY STAR Not all ENERGY STAR products will qualify for the tax credit. View ENERGY STAR criteria.
Oil Furnace AFUE >= 90 30% of cost, up to $1,5002
Gas, Propane, or Oil Hot Water Boiler AFUE >= 90 30% of cost, up to $1,5002
Advanced Main Air Circulating Fan No more than 2% of furnace total energy use 30% of cost, up to $1,5002
Water Heaters Gas, Oil, Propane Water Heater Energy Factor >= 0.82 or a thermal efficiency of at least 90%. 30% of cost, up to $1,5002 Not all ENERGY STAR gas storage and gas condensing water heaters will qualify for the tax credit. All ENERGY STAR gas tankless models will qualify. All ENERGY STAR gas tankless water heaters will qualify. View ENERGY STAR criteria. For a partial list of qualifying products go to the Air Conditioning, Heating, and refrigeration Institute (AHRI) Exit ENERGY STAR
Electric Heat Pump Water Heater Same criteria as ENERGY STAR: Energy Factor >= 2.0 30% of cost, up to $1,5002 All ENERGY STAR electric heat pump water heaters qualify for the tax credit.
Biomass Stove Biomass Stove Stove which burns biomass fuel5 to heat a home or heat water. Thermal efficiency rating of at least 75% as measured using a lower heating value. 30% of cost, up to $1,5002
Geo-Thermal Heat Pump Geo-Thermal Heat Pump Same criteria as ENERGY STAR: Closed Loop: EER >= 14.1 COP >= 3.3 Open Loop: EER >= 16.2 COP >= 3.6 Direct Expansion: EER >= 15 COP >= 3.5 30% of the cost All ENERGY STAR geo-thermal heat pumps qualify for the tax credit. Use IRS Form 5695 PDFExit ENERGY STAR Must be “placed into service” before December 31, 2016.
Solar Energy Systems Solar Water Heating At least half of the energy generated by the “qualifying property” must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household. The credit is not available for expenses for swimming pools or hot tubs. The water must be used in the dwelling. The system must be certified by the Solar Rating and Certification Corporation (SRCC). 30% of cost All ENERGY STAR solar water heaters qualify for the tax credit. Use IRS Form 5695 PDFExit ENERGY STAR Must be placed in service before December 31, 2016.
Photovoltaic Systems Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement. 30% of cost Use IRS Form 5695 PDFExit ENERGY STAR Must be placed in service before December 31, 2016.
Small Wind Energy Systems Residential Small Wind Energy Systems 30% of cost Use IRS Form 5695 PDFExit ENERGY STAR Must be placed in service before December 31, 2016.
Fuel Cells Residential Fuel Cell and microturbine system Efficiency of at least 30% and must have a capacity of at least 0.5 kW. 30% of the cost, up to $1500 per .5 kW of power capacity Use IRS Form 5695 PDFExit ENERGY STAR Must be placed in service before December 31, 2016.

1Either the 2001 Supplement of the 2000 International Energy Conservation Code or the 2004 Supplement of the 2003 International Energy Conservation Code.

2Subject to a $1,500 maximum per homeowner for all improvements combined.

3A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

4Additional information on exterior window features may be viewed at Anatomy of an Energy Efficient Window.

5Biomass Fuel means any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.

The IRS defines “placed in service” as when the property is ready and available for use.

**Please note, not all ENERGY STAR qualified homes and products qualify for a tax credit. These tax credits are available for a number of products at the highest efficiency levels, which typically cost much more than standard products. If, for whatever reason, you decide not to purchase a product covered by the tax credit, you may still consider purchasing an ENERGY STAR product. 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.

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