The federal economic stimulus package signed into law last year included substantial tax credits for energy-saving home improvements. This means you can cut your monthly utility bills AND reduce your income taxes, while making your home more attractive and possibly more valuable when it’s time to sell!
The Existing Home Retrofit Tax Credit includes a range of energy-saving fix-ups, from windows to windmills, that qualify for a tax break from hundreds to thousands of dollars. Here are five points to ponder:
1. The easiest way to qualify for a tax credit is to buy and install approved products that improve your home’s energy efficiency — heating, ventilating, air conditioning (HVAC) systems, biomass stoves, insulation, doors and windows, some types of roofing, and non-solar water heaters. The tax credit is 30% of the cost of the materials up to $1,500. Some items include installation in the tax credit, some do not, so check at the government’s Energy Star web site below.
2. If you put in a geothermal heat pump, small residential wind turbine, or solar energy system, the tax credit could be even bigger. It’s still 30% of the cost, but there’s no upper limit. So $25,000 spent on rooftop solar heat panels gets you a $7,500 tax credit. Fuel cells earn a tax credit of 30% of the cost, up to $500 per 0.5 kW of power capacity.
3. Tax credits are better than tax deductions, which only lower your taxable income. A tax credit reduces the actual taxes you owe.
4. To qualify for the tax credit, you need to keep itemized receipts and product labels and file a special IRS form. There are specific provisions and exclusions for existing and new homes, principal residences and second homes, and rentals. Be sure to consult with a tax accountant. You can get background information at http://www.energystar.gov/index.cfm?c=tax_credits.tx_index.
5. Beyond the federal tax credits, many municipal, county, and state governments, as well as utilities, also offer incentives for purchasing certain energy-efficient products. Check on the internet for cost-saving opportunities from all these sources.