Tax credits have been available since 2005 for homeowners who made energy-efficient improvements to their primary residences. Credits generally are preferable to tax deductions, since credits offer a dollar-for-dollar offset of any tax due.
2010 credit expanded
For the 2009 and 2010 tax years, the energy-efficient home improvement credit was expanded as part of the American Recovery and Reinvestment Act, otherwise known as the stimulus bill.
Many common and relatively easy home energy upgrades made in these two tax years netted the homeowner a credit of 30 percent of the improvement costs, up to a maximum $1,500 claim.
Eligible energy-efficient home improvements in 2010
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| Exterior windows and skylights and storm windows. |
| Exterior doors and storm doors. |
| Metal roofs, asphalt roofs. |
| Insulation. |
Central A/C.
Air source heat pump.
Gas, oil, propane furnace or water boiler.
Advanced main air circulating fan. |
Gas, oil, propane water heater.
Electric heat pump water heater. |
Since the maximum credit amount was spread over the last two tax years, if you maxed out your $1,500 claim on your 2009 return, you're done.
But if you didn't claim anything on your 2009 taxes or had some credit left over in 2010 and made an eligible upgrade, be sure to claim the remainder of the credit now. If you filed for an extension, you have until Oct. 17 to submit your 2010 taxes and claim this tax credit.
Credit claim requirements
File Form 5695 with your Form 1040.
The improvements must be to your main home that you use as your principal residence. The upgrades also must be to an existing home. If you had energy-efficient systems put in a home you built, you'll save on energy costs, but you are not eligible for the tax credit.
Make sure you have a "Manufacturer Certification Statement" detailing the energy advantages of the improvement. You don't need to send the document with your tax return, but hang onto it and your receipts in case the Internal Revenue Service questions your claim.
Installation costs of insulation, windows, doors or roofs do not count toward calculating your credit. You'll need an itemized bill that details the separate costs of the products and installation costs. You can, however, count installation charges for air conditioning and heating systems.
And while this is a credit against any tax you owe, if your tax bill is small and your claim large, you might not get to use all of it because the residential energy credit is nonrefundable. That means you can use the credit amount to reduce what you owe, even zeroing out any tax bill. But once you get to the no-tax level, any excess credit is of no use. You cannot use it to get a refund from the IRS.