Is Your Home More Energy Efficient?

If you made your home more energy-efficient or you're planning to do so this year (2010), you might be eligible for one of two energy credits. 

The first of these credits really targets the type of conventional improvements that you might be making: storm windows, exterior doors, new insulation, a new furnace, or a new water heater.  If you make improvements of that type to your home, you can claim a credit of 30% of the qualifying expenditures. 

The credit limit is $1, 500, or 30% of the amount you spend. That means if you spend at least $5,000 in qualifying expenditures, you would get the maximum $1,500 credit.  Now, this is a $1,500 maximum over a two-year period.  So if you spent all of that in 2009, you can't do it again in 2010. In order for an item to qualify, it has to be even more energy-efficient than it was under the old law.  This means that, in order to get the credit, you have to place the item into service after February 17, 2009. 

The second credit really targets alternative-energy investments, such as solar, wind and geothermal heat pumps.  If you buy qualifying equipment and install it in your home, there's a 30% credit.  But there's no limit on the amount that you can spend for qualifying solar electric, solar water heating, small wind energy and geothermal property costs.   So as long as it is for qualifying expenditures, you get the credit.

These credits are only available for energy-efficient improvements that you make, and that means they have to meet certain energy-efficiency standards.  The best way to confirm that is to check the tax-credit certification on the manufacturer's Website, perhaps the retailer or distributor's Website, or look at that tax-credit certification on the packaging of the product.  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.

You can claim the credits for the tax year when you actually made the purchase or improvement.  That is, if the work was done and paid for in 2009, the credit should be  claimed on your 2009 Tax Return.  If you're going to make improvements that qualify sometime during this calendar year, make a note of it, keep good records, and claim it on your 2010 return.  

Eligible homeowners can claim both of these credits when they file their 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. For more information, click here  for the form and instructions or contact your local PRO-TAX office for assistance. 

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