Residential Energy Credits

Now you see them, now you don’t.  Wait!! Now you see them again.

Those elusive homeowner energy credits are back.  They were available until the end of 2007 and then disappeared in 2008 only to return with the various stimulus packages in 2009.

The energy credit is fairly simple:  You get a credit on your federal income taxes of 30% of the cost of qualified energy products you install in your home in 2009 and 2010.  Qualified products include new windows and insulation, as well as energy efficient heating and air conditioning systems.  The items installed must meet new higher standards of energy efficiency.  The credit applies to the cost of the product but not to the cost of labor for of the installation. 

The maximum total credit you can claim is $1500 (or 30% of $5000). The credit can be used only once, so you cannot claim $1500 in 2009 and then again in 2010. You file form 5695 with your 2009 or 2010 tax return.  This is not a refundable credit, which means that if you owe $1000 in income taxes and qualify for a $1500 credit, you will not get a check for $500 from the IRS.  It also cannot be applied to other taxes such as the self-employment tax.

The IRS has not provided a whole lot of guidance on this credit yet.   Based on various sources, the credit applies only to home improvements and not the construction of a new home.  Other details may change as the year progresses.

A final note:  The manufacturer must give you certification that the property satisfies the standards set in the new law.  Be sure to keep the certifications as well as the receipts for the cost of your products.