If some of the improvements you made to your home last year helped make it more energy efficient, you could end up with smaller utility bills — and a smaller tax bill.
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.
|Product category||Product type|
|Windows||Exterior windows and skylights and storm windows.|
|Doors||Exterior doors and storm doors.|
|Roofing||Metal roofs, asphalt roofs.|
Air source heat pump.
Gas, oil, propane furnace or water boiler.
Advanced main air circulating fan.
|Water heaters||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
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.
2011 credit reduced
The residential energy credit is around for 2011 as well, but it’s not as generous. In fact, this year the credit amounts reverted to the previous, smaller claim amounts.
In addition, the claim process is again more complicated. The improvement categories remain essentially the same, but the credit now follows the 2005 guidelines under which specific improvements qualify for differing credit amounts.
|Product category||Tax credit amount|
|Windows, doors and skylights||10 percent of the cost, up to $500, but windows are capped at $200.|
|Insulation||10 percent of the cost, up to $500.|
|Roofing, metal and asphalt||10 percent of the cost, up to $500.|
|Biomass stoves||Systems that burn biomass fuel to heat a home or heat water, up to $300.|
|HVAC||Advanced main air circulating fan, up to $50;
Central A/C and air source heat pump, up to $500;
Gas, oil, propane furnace or hot water boiler, up to $150.
|Water heaters||Gas, oil, propane water heater, up to $300.
Electric heat pump water heater, up to $300.
The 2011 home energy improvement credit claim requirements are the same as for 2010 tax credit claims.
And these credits also are temporary. They are scheduled to expire Dec. 31, 2011. But that’s not the end of credits for all home-related energy improvements.
More improvements, more credit, longer
If you made or plan to make energy-efficient improvements that are more advanced — and more costly — you might be able to claim an even larger tax credit.
The 2009 stimulus bill included credit provisions that apply to geothermal heat pumps, solar water heating, photovoltaic systems and small wind turbines.
These systems are eligible for a tax credit equal to 30 percent of the cost, including installation. In these cases, though, there is no maximum credit cap. Your total expenses count as your credit.
This tax break is in effect for qualifying residential systems installed by Dec. 31, 2016.