DALLAS – If summer's heat has you thinking of ways to help keep your cool, it's good to know that last year's American Recovery and Reinvestment Act still provides tax incentives for qualifying home improvements.
"There are two credits available to people who make their homes more energy-efficient, said Clay Sanford, an IRS spokesman in Dallas. "The first of these credits, the Residential Energy Property Credit, targets the kind of conventional improvements that you might be making."
The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.
If you make improvements of that type to your home, you can claim a credit of 30% of qualifying expenditures--up to a maximum credit limit of $1,500. For example, $5,000 in qualifying expenditures would bring the top credit of $1,500. Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are in addition to any energy savings that may result.
Sanford pointed out that this is a $1,500 maximum credit made available over the two-year period of 2009 and 2010. So, if you have already obtained the maximum credit on your 2009 tax return for improvements made last year, you could not get it again on your 2010 return.
Homeowners should also check out a second tax credit designed to spur investment in alternative energy equipment. The Residential Energy Efficient Property Credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property.
Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer's tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer's website or with the product packaging. Normally, a homeowner can rely on this certification. The IRS cautions that the manufacturer's certification is different from the Department of Energy's Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
For more information, (click here) to see The American Recovery Reinvestment Act of 2009: Information Center.