What is an energy tax credit? Unlike a rebate, you don’t receive money back when you buy an energy efficient product. You claim the tax credit on your federal income tax at the end of the year. The credit increases your tax refund or reduces the amount you have to pay. Improvements or products bought in 2009 and 2010 are eligible for an income tax credit of up to $1,500 for installing energy efficient features.
Who can qualify of an Energy Tax Credit? Anyone who installs specific energy-efficient home improvements, like ENERGY STAR products such as new ENERGY STAR windows, ENERGY STAR doors, ENERGY STAR roofs, ENERGY STAR insulation, and ENERGY STAR heating and cooling equipment in your home.
•Windows including skylights and storm windows.
•Insulation and roofs.
• Doors with seals to limit air penetration, such as caulk, weather stripping, and foam sealants, as well as storm doors.
•Central air conditioner, furnace, boiler, heat pump, water heater, or bio gas (e.g. corn) stove. Starting in 2009, geothermal heat pumps are entitled for a separate tax credit!
Another thing you should know about energy tax credit, is that all windows, doors, insulation, and roofs must stay installed for at least five years to qualify for the tax credit. Showing a two-year warranty is usually sufficient enough proof of this.
What products qualifies for an energy tax credit? Manufacturers endorse either on their packaging or on their web site which of their products qualify for the energy tax credit.
So what is the energy tax credit worth? Energy tax credit amounts to 30 percent of the cost, including the installation costs for heating and cooling equipment. A cap of $1,500 for the fiscal years 2009 and 2010 combined as been made. This means the credit is valid up to $5,000 in total costs.
How do you get you energy tax credit? An IRS Form 5695 with your taxes is needed. Plus keep your receipts that prove you purchased the products and a copy of the manufacturer’s certification like the ENERGY STAR label. Ask your accountant or tax advisors to provide more guidance.
You should also know each energy efficient product offers different tax credit guidelines. For energy efficient windows and skylights that were installed in January 1 through May 31, 2009 require existing manufacturer certifications and Energy Star labels. From June 1, 2009 and onwards, a more strict criteria applies, see the IRS guidance to find out what qualifications must be met.
Energy tax credits for geothermal heat pumps, solar panels, solar water heaters, and fuel cells, were also modified starting in 2009. Geothermal heat pumps placed in service starting in 2009 are now eligible for a tax credit for 30 percent of the cost. These credits are effective through December 21, 2016. Geothermal heat pumps must meet ENERGY STAR guidelines in order to be eligible for the tax credit.
Some ENERGY STAR appliances are available for an energy tax credit; however what you should know about the energy tax credit is each state offers different credits. To see what qualifies in your state go to ENERGY STAR Rebate Finder.
Here are some examples of ENERGY STAR appliances rebates for appliances in California.
• ENERGY STAR washer rebates: The Metropolitan Water District of Southern California offers an $85 rebate for ENERGY STAR qualified clothes washers with a Water Factor of 5.0 or lower.
• ENERGY STAR refrigerator: Edison is offering a $50 rebate for ENERGY STAR qualified refrigerators. Plus a $50 rebate for recycling your old refrigerators or freezers that are in working condition.
You can also find ENERGY STAR special promotions for ENERGY STAR appliances. Like if you purchase 2 or more eligible ENERGY STAR qualified GE Profile or GE Cafe appliances you receive a Visa prepaid card valuing from $100 to $500. For more information on what may qualify for this GE promotion go to GE appliance.