January 2010
Saving with the Stimulus
by Megan McKoy
Consumers who took the plunge and made qualifying energy efficiency upgrades in 2009 should see additional benefits this spring as tax season approaches. For those still waiting on the sidelines, you have until the end of the year to take advantage of federal energy efficiency tax credits.
Energy Efficiency Tax Credits
Through the 2009 American Recovery and Reinvestment Act—better known as the stimulus bill—Uncle Sam offers a personal tax credit of up to $1,500 for energy efficiency measures made at existing homes during 2009 and 2010. Consumers can recover 30 percent of the cost of adding insulation materials and exterior doors, windows, and roofs designed to help reduce a home’s heat loss or gain. The credit also pulls in efficient central air conditioners, air-source heat pumps, hot water boilers, and biomass stoves.
“These credits put more money in homeowners’ pockets,” indicates Rob Marvin, media relations specialist for the Internal Revenue Service (IRS).
“Say you spend $1,000 on new insulation. Taxpayers would get, in the form of a tax credit, $300 back. This translates to a 30 percent tax credit. That’s a lot more generous than the old [10 percent] credit provided for the 2006 and 2007 tax years.”
However, qualifying guidelines are tougher, too. “For an item to qualify, it has to be even more energy-efficient than under the 2006 and 2007 program,” Marvin notes. “To utilize the new credit, a home improvement must have taken place after February 17, 2009 [the day the stimulus bill was signed into law].”
So how do you know which products qualify for the tax credit? Some purchases are easier to determine than others.
“For exterior windows and skylights, rely on the Energy Star label,” adds Marvin. “This is the green label you see in stores.”
For other efficiency upgrades, request a Manufacturer Certification Statement that the product or component qualifies for the tax credit. You can also visit www.irs.gov/recovery to review guidelines for qualifying purchases.
You must file for energy tax credits using IRS Form 5695. With a maximum value of $1,500 for improvements made in 2009 and 2010, the credit may be applied toward material costs on all projects. Installation costs for heating, ventilation and air conditioning systems, and biomass stoves also count towards the credit.
Energy tax credits reduce taxes owed, dollar for dollar, and can be carried forward to following years. While they can help boost any refund you receive, you won’t receive a check directly for the credit amount.
Renewable Energy Tax Credits
Consumers who want to generate their own power are eligible for renewable energy tax credits on projects completed through 2016.
“This covers alternative-energy equipment connected to your house, such as solar water heaters, geothermal heat pumps, small wind turbines, and other similar projects,” says Marvin. The credit, covering 30 percent of the cost of materials and installation for solar panels, solar water heaters, and geothermal heat pumps, applies to both existing homes and new construction. Projects must be placed into service between January 1, 2009 and December 31, 2016.
For More Information
Energy Star, a joint program of the U.S. Department of Energy and the U.S. Environmental Protection Agency, provides guidelines on what qualifies for both tax credits at www.energystar.gov, keyword ‘Tax credits.’ The IRS also provides a wealth of resources on all of the tax benefits offered through the stimulus program at www.irs.gov/recovery
Visit the Database for State Incentives for Renewables and Efficiency, a project funded by the U.S. Department of Energy, at www.dsireusa.org
You may also contact your electric cooperative for information on any rebate energy efficiency programs it may offer. A listing of electric cooperative telephone numbers and street addresses are provided on our Website.
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