Federal Tax Credits for Energy Efficiency
By: Diane Tuman, Zillow Content Manager | June 10, 2009
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:
- Energy Provisions of the American Recovery and Reinvestment Act of 2009 [IRS]
- New IRS Incentives, from Hot to Cold [NY Times]
- Energy-Efficiency Home and Vehicle Tax Credits [Alliance to Save Energy]
- Stimulus Package: Homeowner Perks [CNN]
- Stumble it!
- Categories: Home Improvement
Comments
37 Comments so far
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Inheritance Tax Planning UK on June 11, 2009 1:50 am
Inheritance tax UK in short means passing on a good news and a bad news in terms of financial matter to your children, family or just anyone other than your spouse or civil partner.
Federal Tax Credits for Energy Efficiency « Affinity Realty’s Blog on June 11, 2009 10:13 am
[...] Federal Tax Credits for Energy Efficiency Federal Tax Credits for Energy Efficiency [...]
Henry on June 11, 2009 1:35 pm
We have seen business boom in the geothermal sector as the tax credits have been implemented. It nice to see people being able to afford to ‘go green’.
Sandy @ SA Commercial Property on June 11, 2009 11:05 pm
Very interesting post and something new to learn about its amazing how tax is different over the world, thanks for the read.
Nike Lebron VI on June 12, 2009 8:21 am
Yes! It nice to see people being able to afford to ‘go green’.
Amazed on June 15, 2009 11:25 am
Someone should pass this on to Al Gore. His MONTHLY electric bill is over $12,000.
epc london on June 16, 2009 7:12 am
soon everyone will be green!
MACK on June 23, 2009 3:06 pm
AMAZED.. YOU FELL FOR ANOTHER REPUBLICAN SCUMBAG SMEAR… IT’S A LIE !
Krista Black on June 23, 2009 4:18 pm
Al Gore’s energy bill as discussed by ABC. Republican lie? Give me a break - he’s a first class hypocrite - look up your facts before you comment.
http://abcnews.go.com/Politics/GlobalWarming/Story?id=2906888
As for the spending on “go green”: Read “The State of Fear” by the late Michael Crichton or google his addresses to many of the scientific community. It’s a disspointment we continue to subsidize the effort before we have the ability to understand OR measure the outcome of these incentives on the planet. AND, we can’t afford this - we’re broke last I checked.
The irony is that it’s likely that the only way we can afford to pay off this wild spending will be to drill and mine our natural resources. Darned those unintended consequences !
Franko on June 23, 2009 6:03 pm
I’m going green in the trailer park.
Take a look at everything I’ve done so far. I can show you how to do it and me and uncle dad will.
Jim on June 23, 2009 6:41 pm
People are being misled. The USG has no money, ALL monies belong to the U.S.taxpayers! Its your money, confiscated then REDISTRIBUTED after a large “cut” is removed in WDC to fund bureaucracies. Its a great big self licking ice cream cone funded by YOU and I.
That said, in order to lower the net amount of tax I actually pay to the bloated machine, I leverage every tax saving loophole available. If it means I happen to go “supposedly” green then so be it. Bottom line , I recover some of my hard earned then confiscated money.
Here’s an idea , why not let Americans keep our earned money and spend it on what we choose to purchase of our own free will?
Duh on June 23, 2009 8:35 pm
Don’t forget, people….If you are receiving a tax refund already because of Earned Income, etc., it’s doubtful you’ll qualify for this credit.
mike on June 23, 2009 9:01 pm
So let me ask , If I replace my a/c, my front door, I could claim 30% of the invoice I submitt and the total of those is not more than my return?
Paul on June 24, 2009 4:29 am
yes… but i dont think it matters if its more than your return. its just up to $1,500. you’ll probably spend much more than that and 30% of that total is likely going to be thousands, but you’ll only be able to claim up to $1,500. or did i read that wrong?
robert on June 24, 2009 5:00 am
So can anyone tell me does the tax credit include the cost of instalution or is it for just the price of the product?????????
Angel on June 24, 2009 5:47 am
Why is the energy efficient tax credit only on primary residence. If I install energy efficient windows anywhere on my property there should be a tax incentive credit!
Bob on June 24, 2009 6:59 am
Robert:
30% of the total cost, product and installation labor, up to $1500 is allowed.
Eric Jernigan on June 24, 2009 9:38 am
Franko:
I would think that it would be tough to green a trailer park (other than adding green space). What types of things are you doing?
RoboRobb on June 24, 2009 10:23 am
One question I have not seen answered; if I took advantage of the 1500 credit prior to 2009 do I qualify again for more qualified improvements as long as they are placed “in service” in 2009? Anyone know the answer? If you do you are GOOOOOOD!
RoboRobb on June 24, 2009 10:25 am
One question I have not seen answered; if I took advantage of the 1500 credit prior to 2009 do I qualify again for more qualified improvements as long as they are placed “in service” in 2009? Anyone know the answer? If you do you are GOOOOOOD!
Kathy on June 24, 2009 11:42 am
Jim
That’s just the problem! Americans are holding on to their hard earned money and small contractors like me are feeling it! The Tax Rebate has gotten people who are in the market to buy home improvements to get on with it!… which helps contractors struggling to survive…..and the Tax Rebate does NOT cover installation.
Kathy on June 24, 2009 12:12 pm
Robo:
Qualifying home improvements must be installed and ready for use between January 1, 2009 and December 31, 2010 at the homeowner’s principle place of residence. In the event a purchase was made PRIOR to the law taking effect, the homeowner would still benefit as long as the products are installed and payment is made in 2009. The $1,500 tax credit is a one-time only credit. In other words, if a homeowner purchased windows qualifying for the full $1,500 credit in 2009 and then purchased a roof that also qualified for a $1,500 credit in 2010, he or she would be eligible to claim only a single credit of $1,500.
Joan Schiller on June 24, 2009 12:29 pm
I had all this good stuff installed Nov-Dec 2008..
do I qualify for this “goodie”?
Louise K. Martin on June 24, 2009 7:09 pm
We had the approved hurricane proof windows installed
a couple of months ago by licensed installers and
received our $5,000. credit back from My Safe Florida
Home program. Please be advised that with all of the
approvals from Florida, they informed us that the
federal rules are so restrictive, that next to no
windows will be approved by the government, and to
not get our hopes up about the $1,500. These contractors know what they’re talking about, too.
Don’t get your hopes up and speak to a licensed and
informed contractor to see what they have to say.
hoodwinked again on June 25, 2009 11:59 am
It’s all pretty much a scam , the contractors know all about this and have increased their prices by 30 per cent ,maybe more if you live in a red state, so they are the ones actually getting the 1500 dollars,more or less, for any of these improvements.( you’ll get the write-off for sure but on the inflated price you wind up paying high retail anyway.Nice deal,eh?)Of course you can always do it yourself. Just like trying to modify your mortgage, I dare you, it’ll never happen I don’t care how you qualify. At my bank/mortgage holder Chase, they told me straight out that they are not set up to handle the volume…..they have devoted a total of 6 underwriters,nationwide, to “loan modifications”.If you apply today with a standard app expect to be approved in late 2011 provided you hire an attorney or a paralegal to do the follow up.
hoodwinked again on June 25, 2009 1:56 pm
Krista Black on June 23, 2009 4:18 pm wrote this amazing tidbit…her and her type would gladly profit from the shortselling of our homebase….planet earth. As for being broke? Lot of baloney,she has no clue as to how wealth is even created in the first place. Drill baby drill, anyway read this. so depressing.
Al Gore’s energy bill as discussed by ABC. Republican lie? Give me a break - he’s a first class hypocrite - look up your facts before you comment.
http://abcnews.go.com/Politics/GlobalWarming/Story?id=2906888
As for the spending on “go green”: Read “The State of Fear” by the late Michael Crichton or google his addresses to many of the scientific community. It’s a disspointment we continue to subsidize the effort before we have the ability to understand OR measure the outcome of these incentives on the planet. AND, we can’t afford this - we’re broke last I checked.
The irony is that it’s likely that the only way we can afford to pay off this wild spending will be to drill and mine our natural resources. Darned those unintended consequences !
Krista Black on June 26, 2009 4:13 pm
hoodwinked again:
Unfortunately for the entire global population the environemental movement has been high jacked by exactly your kind of argument. Correct me if I’m wrong but I think you’re saying: “if you don’t defend the planet and spend any amount that we can dream up to do it, regardless of whether we can measure improvement, then you’re an immoral ’short seller’”. Did I get that about right?
I make a researched (albeit minimally concerning Gore) and articulate argument that perhaps deficit spending is really stupid when we consider that we have exactly zero idea if if our massive spending will have any effect and you come back with “nana-neerer your a stinker?” I’m just pointing out there are SO many better ways to deploy resources and they are NOT your resources to take. My VERY concern is that we don’t understand as we waste money and resources wildly; shame on us all. We the people voted for this disaster of policy. Someone is getting rich and it’s not Mother Earth.
You actually make my point quite nicely: Your faux morality in place of science and defense of policy absent any measures of a good investment is what strikes me as depressing. Do you really think Congress reads this dribble? But, I appreciate that you are in a crowd that’s a bit caught up right now.
And, neither my argument or yours has anything to do with “short selling”; a trendy term which you have improperly applied here.
Mark on June 29, 2009 12:04 am
For those begrudging the Tax Credit, its pretty simple, don’t worry about it, those of us who wish to upgrade our homes, do so because they need upgrading, the tax credit is a bonus.
I redid my roof last year, and the year prior I did the Air conditioner and furnace, and this year for my comfort I am doing all of the windows and doors in my home, and as a bonus I will get a 1500 dollar tax credit…
How can you go wrong, your upgrading your home, ad getting a bonus!…
Get off your high horses Republicans and realize this is a good thing!…
Mark on June 29, 2009 12:06 am
Hoodwinked, I modified my mortgage and was done in 4 months…about the same it would take to refinance…amazing huh?…better get off your butt and crawl under that rock you have hid under for quite some time, and stop the misinformation
hoodwinked again on July 2, 2009 10:40 pm
Krista Black…
After re reading your post I probably mis spoke on a few points and didn’t see exactly where you were coming from. At first glance it seemed you were in favor of more drilling et al and now it seems that I think you mean if we don’t get it right in the correction of our current situation, regarding both our enviroment and our economic problems then we will be FORCED into more drilling and on that I completely agree with you. So much for my shooting from the hip. So while I tend to be more emotional I think in the end I do agree with you on most of your points. As for the idea that congress would read this dribble…in light of the rampant idiocy there I doubt that they read much of anything other than menus, tanning bed ads and Craigslist personals.It is so sad that the Democrats are again headed for confusion and chaos,and probably a huge mid term loss, and just can’t seem to be on the same side to get anything done and the Republicans are lock stepped on a path of complete ignorance but at least are all on the same team.As for all the issues and others like healthcare if not now, when?
kaya on July 23, 2009 2:23 pm
Can’t get a credit for windows, only solar better check the IRS website first !!!!
Stan on August 1, 2009 7:14 pm
I think it is fantastic how the stimulus funds are making a difference. They are being taken advantage of all the time with the installation of geothermal heat pumps to replace high energy heating and cooling systems.
Amanda on September 10, 2009 2:42 am
These are great schemes but I am aware that in other countries the only people who can do their best to obtain these benefits have to spend so much initially that it puts those that need the benefits as the least likely to receive them. Maybe this will work out differently but I am not convinced!
Amanda
Panel Clips on September 17, 2009 11:59 am
Thanks for this information and its great that the government is offering these types of credits, however, I think homeowners should take it upon themselves to make these changes because it can drastically reduce their energy bills and save them a great deal of money in the long run.
George on October 24, 2009 11:20 am
That is a very informative article. Thank you for sharing it.
100mortgage on October 25, 2009 7:24 am
Extremely useful and productive info, thank you.
Buy To Let on October 25, 2009 7:25 am
Sounds like there may be something in it, but new builds are rather expensive.