Earn Tax Credits for Energy-Efficient Improvements

If you can come up with the cash, make energy-efficient home improvements now to receive savings from both tax credits and reduced energy bills.

Thanks to economic stimulus package changes, you may be eligible for federal tax credits, which are generally more valuable than tax deductions. A deduction reduces taxable income based on your tax bracket, while a credit gives you 100% of the credit back and is not income-based.

Here's an example: If you are in the 35% tax bracket, a $1,000 deduction reduces your tax bill by $350, but a $1,000 tax credit reduces your tax bill by the full $1,000. You claim the credit when you file your federal income tax return.

Tax credits are available for 30% of the cost of these energy-efficient home improvements, up to $1,500, through 2010 for existing primary homes only:

• Energy-efficient furnace, air conditioner, heat pump, or boiler
• Insulation
• Skylights and storm windows and doors
• Nonsolar water heater
• Roofs (metal and asphalt)
• Biomass stoves

Tax credits are available for up to 30% of the cost of these energy-efficient improvements, with no maximum dollar amount, through 2016 for existing primary homes, new home construction, rentals, and secondary homes:

• Geothermal (ground-source) heat pump
• Solar panels
• Solar water heater
• Small wind energy system

For a more detailed breakdown of energy-efficient improvements, tax credits, and qualifications, visit Alliance to Save Energy, the Weatherization Source, and Energy Star.

Published October 26, 2009

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