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Save Taxes with Home Energy Efficiency

Save Taxes with Home Energy Efficiency

The Residential Energy Efficiency Tax Credit is a federal program that gives homeowners a personal tax credit for making energy efficiency improvements to their homes. The program covers some upgrades to energy efficient systems such as:

  • Water heating systems
  • Windows, doors, skylights
  • Weatherization
  • Heating and cooling systems.

Ensure your upgrades qualify for tax credits

To be eligible for the tax credit, the home must be your primary residence and upgrades must meet certain requirements. Before you make improvements, make sure the product you’re installing meets the standards of the program. Even though a product is Energy Star certified, it may not qualify—always check with your contractor first. In addition, you may need a manufacturer’s certification statement to prove the eligibility of the product you install. For more information, see frequently asked questions on the Energy Star website.

Pay attention to costs and caps

The tax credit program has caps on the amount of credit you can claim. For example, improvements to building envelopes are capped at $500 and electric heat pump water heaters (with an energy factor of minimum 2.0) are capped at $300. Installation costs are not included in tax credit calculations.

The maximum aggregate amount of credit you can claim is $500 for purchases made in 2013. If you’ve already claimed this credit in previous years, you’re not allowed to claim it again.

Now is the time to upgrade

The Residential Energy Efficiency Tax Credit is set to expire on December 31, 2013. If you’re thinking of making energy efficiency improvements to your home, this is the time to do it. Although the program may be renewed, there’s no guarantee.

For more information about the Residential Energy Efficiency Tax Credit, visit energy.gov and DSIRE (the Database of State Incentives for Renewables and Efficiency).

In addition, many state and local governments also offer incentives for home energy upgrades. To see what your state has to offer, select your state on the DSIRE map of state incentives.

Additional tips for saving energy

Even if you have no immediate plans to install energy efficient systems in your home, you can still reduce energy consumption and costs through small changes, such as installing programmable thermostats and energy efficient light bulbs. For more ideas, see the U.S. Department of Energy’s EnergySavers: Tips on Saving Money and Energy at Home.

Homeowner Personal Tax Credits for Renewable Energy Systems

Homeowner Personal Tax Credits for Renewable Energy Systems

In an earlier post, I outlined personal tax credits for homeowners who make energy efficiency improvements to their homes. Whether you’re considering moving or staying put, improving your home may be a great investment. Energy improvements save you money over the long term
and many of them also come with tax rebates.

Today, I’ll discuss tax incentives for homeowners who install renewable energy technologies. Also sometimes called “alternative” energy systems, these relatively new technologies have been scaled down and developed for residential use. To learn more about each one, do a simple Google search.

Under the Residential Renewable Energy Tax Credit, the following renewable energy systems are eligible for personal tax credits:

  • Solar-electric systems – These small systems produce electricity for your home or office.
  • Solar water-heating systems – These systems use the sun to heat your water.
  • Fuel cell systems – An alternative energy system that generates heat and energy from one unit.
  • Wind-energy systems – With more systems being developed for residential use, wind energy can make a good supplement to traditional utility-based energy.
  • Geothermal heat pump systems – These systems use the earth’s natural temperatures to cool and heat your home.

No credit cap on most systems

The tax credit covers up to 30% of qualified expenditures. In most cases, the home must be located in the United States and be owned and used as a residence by the taxpayer.

To qualify for the tax credit, your renewable energy system has to meet certain requirements, such as minimum capacity and certification standards. Most systems have no maximum credit cap, with the exception of fuel cell systems, which are limited to a maximum credit of $500 per half kilowatt.

Any unused portion of the tax credit can be carried forward until 2016. You can only claim the tax credit after the renewable energy system has been installed.

Check your state for rebates, too

In addition to the federal program, many states also offer incentives for the use of renewable energy sources, such as personal tax credits, loan programs, property tax incentives, sales tax incentives, and rebate programs. To see what’s available in your state, select your state on the DSIRE incentive map.

Not sure if a renewable energy source is right for your home? Energy.gov has planning assistance and tips for homeowners.