Tax Credits for Energy Efficient Home Improvements Under the New Economic Stimulus Plan
The Stimulus Plan encourages homeowners to make energy-efficient home improvements by providing a sizeable tax credit to benefit homeowners that do. Congress has allocated approximately $4 billion for the tax credit, in the hope that it will not only stimulate spending by homeowners, but that it will encourage owners of existing homes to make improvements in a responsible way which conserve energy use. A recent study conducted in California showed that 70 percent of greenhouse-gas emissions coming from single-family properties come from homes built before 1983. According to that study, new homes are fairly energy-efficient, but existing homes — particularly older homes — could benefit a great deal from the use of energy-efficient materials and appliances.
If you need certain specific home improvements and can afford them, now is a great time to do them. Which home improvements are eligible for the tax credit? Well, if you install energy-efficient windows or exterior doors, furnaces, air conditioners, water heaters, heat pumps, solar panels, or insulation, you should be eligible for the tax credit. Again, the goal is to use energy-efficient materials, not just any materials; to be safe, make sure the items you purchase are Energy Star rated.
You can receive 30% of the cost of the improvements you make, capped at $1500. If you spend $1000, for example, you can claim a credit of $300 on your tax return. In order to receive the maximum credit of $1500, you need to spend at least $5000 on your energy-efficient home improvements. Remember to keep all efficiency certifications or Energy Star labels from any products you install, and make sure you have all of the relevant manufacturer information and model numbers; also you must keep receipts for repairs completed by your contractor. You can claim the credit on your 2009 or 2010 tax return, using Form 5695.
Like the new homebuyer tax credit, this tax credit is also refundable. If you are eligible to claim $1500 for this tax credit, and you do not otherwise owe any taxes at the end of the year, you will actually receive a check of $1500 back from the IRS.