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Tax
Credits Help Homeowners Winterize their Homes, Save Energy
IR-2009-98, Oct. 29, 2009
People can now weatherize their homes and be rewarded for their
efforts. According to the Internal Revenue Service, homeowners making
energy-saving improvements this fall can cut their winter heating bills
and lower their 2009 tax bill as well.
The American Recovery and Reinvestment Act (Recovery Act), enacted
earlier this year, expanded two home energy tax credits: the
non-business energy property credit and the residential energy efficient
property credit.
Non-business Energy Property Credit
This credit equals 30 percent of what a homeowner spends on eligible
energy-saving improvements, up to a maximum tax credit of $1,500 for the
combined 2009 and 2010 tax years. The cost of certain high-efficiency
heating and air conditioning systems, water heaters and stoves that burn
biomass all qualify, along with labor costs for installing these items.
In addition, the cost of energy-efficient windows and skylights,
energy-efficient doors, qualifying insulation and certain roofs also
qualify for the credit, though the cost of installing these items does
not count.
By spending as little as $5,000 before the end of the year on
eligible energy-saving improvements, a homeowner can save as much as
$1,500 on his or her 2009 federal income tax return. Due to limits based
on tax liability, other credits claimed by a particular taxpayer and
other factors, actual tax savings will vary. These tax savings are on
top of any energy savings that may result.
Residential Energy Efficient Property Credit
Homeowners going green should also check out a second tax credit
designed to spur investment in alternative energy equipment. The
residential energy efficient property credit, equals 30 percent of what
a homeowner spends on qualifying property such as solar electric
systems, solar hot water heaters, geothermal heat pumps, wind turbines,
and fuel cell property. Generally, labor costs are included when
calculating this credit. Also, no cap exists on the amount of
credit available except in the case of fuel cell property.
Not all energy-efficient improvements qualify for these tax credits.
For that reason, homeowners should check the manufacturer’s tax credit
certification statement before purchasing or installing any of these
improvements. The certification statement can usually be found on the
manufacturer’s website or with the product packaging. Normally, a
homeowner can rely on this certification. The IRS cautions that
the manufacturer’s certification is different from the Department of
Energy’s Energy Star label, and not all Energy Star labeled products
qualify for the tax credits.
Eligible homeowners can claim both of these credits when they file
their 2009 federal income tax return. Because these are credits, not
deductions, they increase a taxpayer’s refund or reduce the tax he or
she owes. An eligible taxpayer can claim these credits, regardless of
whether he or she itemizes deductions on Schedule A. Use Form 5695,
Residential Energy Credits, to figure and claim these credits. A draft
version of this form is available now on IRS.gov.
