You can make your home more energy-efficient and reduce your taxes at the same time.
"Individuals can make energy-conscious purchases that will provide tax benefits when filling out their tax returns next year. The new law provides tax credits for making your principal residence, which must be in the United States, more energy efficient and for buying certain energy efficient items." -- from the IRS
Basic Requirements:
You purchase and install qualifying energy-efficient property in your main home in the years 2006, 2007, and 2009. You must purchase new energy-efficient equipment, and the equipment must be expected to remain installed for at least five years. The energy credit is not available for improvements made during the year 2008, according to the EnergyStar Web site, which states: "Tax credits for these residential products, which had expired at the end of 2007, will now be available for improvements made during 2009. However, improvements made during 2008 are not eligible for a tax credit."Examples of home improvements that could qualify as tax credits:
- exterior doors and windows,
- storm windows,
- skylights,
- metal roofs,
- insulation,
- central air conditioning and heating,
- geothermal heat pumps,
- hot water boilers,
- advanced main air circulating fans,
- biomass fuel stoves with a thermal efficiency rating of 75% or more, and
- asphalt roofs with cooling granules.
Home Improvements (aka Nonbusiness Energy Property Credit)
You can receive a tax credit of 10% of the purchase price of qualified energy-efficient products. According the the IRS, "To qualify, a component must meet or exceed the criteria established by the 2000 International Energy Conservation Code (including supplements) and must be installed in the taxpayer's main home in the United States."
Dollar Limits:
The tax credit for home improvement purchases is limited to $500. The $500 limit applies to the total credit you can claim for all years combined. A maximum of $200 of your $500 total limit can be used for purchasing windows.
Solar Panels and Fuel Cell Power Plants (aka Residential Energy Efficient Property Credit)
You can install "solar panels, solar water heating equipment, or a fuel cell power plant to their homes in the United States. In general, a qualified fuel cell power plant converts a fuel into electricity using electrochemical means, has an electricity –only generation efficiency of more than 30 percent and generates at least 0.5 kilowatts of electricity. Taxpayers are allowed one credit equal to 30 percent of the qualified investment in a solar panel up to a maximum credit of $2,000, and another equivalent credit for investing in a solar water heating system. No part of either system can be used to heat a pool or hot tub."This tax credit is also available for wind and geothermal-powered systems, as added by the Emergency Economic Stabilization Act. Wind energy equipment will produce a tax credit worth 30% of the cost of the equipment, with a maximum credit of $4,000. Geothermal heat pumps qualify for a credit worth 30% of the cost, with a maximum credit of $2,000.
Dollar Limits:
- $2,000 for qualified photovoltaic property costs,
- $2,000 for qualified solar water heating property costs, and
- $500 for each half kilowatt of capacity of qualified fuel cell property for which qualified fuel cell property costs are paid.
In addition, "A credit limit for residential energy property costs for all tax years of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property." (From IRS Publication 553)
