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Don’t qualify for the Obama Refinance or Loan Modification programs but still want your piece of the pie? Under the American Recovery and Reinvestment Act of 2009,  the Feds will pay you to save energy through home improvement projects (and energy-efficient autos).

Quick summary of Energy Tax Incentives (from Department of Energy):

Consumers who purchase and install specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in existing homes can receive a tax credit for 30% of the cost, up to $1,500, for improvements “placed in service” starting January 1, 2009, through December 31, 2010.

What you need to know about Federal Tax Credits for Energy Efficiency (from ENERGY STAR):

  • must be “placed in service” (i.e., installed) from January 1, 2009 through December 31, 2010
  • must be for taxpayer’s principal residence, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, and small wind energy systems (where second homes and rentals qualify)
  • $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 small wind energy systems which are not subject to this cap, and are in effect through 2016
  • must have a Manufacturer Certification Statement to qualify
  • for record keeping, save your receipts and the Manufacturer Certification Statement
  • 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 energy systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters.

So, what is a tax credit?

A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. Consumers can itemize purchases on their federal income tax form, which will lower the total amount of tax they owe the government.

One big caveat

According to the non-profit Alliance to Save Energy, “In order to be eligible for the tax credit, heating and cooling equipment must meet specified measures of energy efficiency. Individuals can search for qualifying products on the, Consortium for Energy Efficiency’s Web site.

So, if you were planning on doing these upgrades to your home anyway, make sure to follow the guidelines so you can get a tax credit! While you’re at it, check out home improvement ideas.

Further reading:

  • michael paslawsky

    how do i get any credit when i do not have to file tax due to no income only social security

  • http://www.castax.com.au/Cheap%20Tax%20return%20Sydney%20income%20preperation.html Tax Return Sydney

    Go Green it is a great way to promote green.

  • http://www.solarbright.com.au Skylights

    Great article Diane. If we use the traditional power systems we will consume our planet. This is why we need to explor other energy sources such as solar, wind and so on….

  • gp

    Kreider, June 16,2009: The Gores’ home is certified by the US Green Building Council as a Gold LEED certified home for retrofitted homes. As part of the LEED certification process, they upgraded their windows, lighting, appliances and insulation, among other items in and around the home […] The combined natural gas and electric bill was about 1700 dollars per month and never the 12,000 dollars per month as claimed. The residence is now powered with a geothermal system as well as 33-solar panels. The Gores also participate in the “Green Power-Switch” program offered by their utility [company]. The home is 10,000 square feet and doubles as both a family residence and the working offices for both Tipper Gore and Al.

    Kreider also noted that, contrary to what was claimed in the original slanderous e-mail, the Gores’ residence “does not have a luxury guest house.”

    We didn’t ask for the Gores’ electric bills, so we can’t say how much efficiency improvement the family has accomplished. But if the e-mail was on target in 2007; it’s out of date now.

  • http://www.smeba.com.au Tax Accountant Sydney

    Going green is great but is it always a good thing? Sometimes the upfront perceived “green” benefits are outweighed by huge economic disadvantages for the economy.

  • Redondo

    Okay, THIS is where many of us are being SCAMMED again – we have been misled that we can take the credit in MORE THAN ONE YEAR – and that is apparently NOT true – even our contractor said, “Oh, yeah, you tookd the 1,500 last year on your a/c unit, but if you pay me $15,000 for putting in new windows, you will qualify AGAIN in 2010 for another $1,500 – AND THE NEWS MEDIA IS ALSO *NOT* MAKING IT CLIEAR THAT THIS IS *NOT* TRUE!

    We needed to make the improvements anyway, but to have the media AND contractors NOT CLARIFYING and/or lying in order to get the jobs, is really a scam – I think MANY people are going to get ‘bit’ by the ‘misinofrmation’ – it should be in BIG BOLD LETTERS: HEY, DUMMY (um, yea, that’s *me*), YOU ONLY CAN TAKE THE $1,500 CREDIT IN 2009 OR 2010, NOT BOTH!

    THAT simple wording would have made it indeibly and utterly clear.
    Scammed again.

  • http://www.squidoo.com/panasonic-lumix-dmc-fh20k-review Panasonic Lumix DMC FH20K Review

    Heya i am for the first time here. I came across this board and I find It truly useful & it helped me out a lot. I hope to give something back and help others like you aided me.

  • Pingback: 6 Tax Breaks Every Homeowner Should Know | Zillow Blog - Real Estate Market Stats, Celebrity Real Estate, and Zillow News

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  • Pingback: energy efficient tax credit, first option lending, first option mortgage, government assistance, homeowner tax credits, mortgage payment

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