Now is a great time to make energy efficient upgrades. Available utility incentives can be combined with the federal tax credit.
The federal energy efficiency tax credit has been extended through 2011, and tax credits are available up to $500*.
*Please note the changes to credit limits and eligibility. Consult with a tax professional to find out about your individual eligibility.
For eligible units installed between January 1, 2011 and December 31, 2011, the credit is no more than 10% of energy efficiency improvement costs, up to a maximum of $500. Certain qualifiying equipment is subject to special credit limits, such as:
- High efficiency furnaces and boilers – $150
- Air Conditioners and heat pumps – $300
- Main air circulating fans – $50
- ENERGY STAR Windows – $200
- Energy efficient water heaters – $300
The $500 cap applies to anyone who received the credit from Jan. 1, 2005 to present. This means if you’ve claimed a cumulative credit of $500 or more of the tax credit since Jan. 1, 2005, you aren't eligible for the 2011 extension. If you’ve claimed less than $500, you are eligible for the difference with qualifying measures.
Certain renewable energy tax credits for solar PV, solar hot water, and geothermal, for example, remain in place.
Frequently asked questions
Q: How much is the tax credit for?
A: For most improvements, the tax credit is 10% of the cost, up to $500.
Q: How do I claim the tax credit?
File IRS Form 5695 with your 2011 tax return. Keep receipts proving that you purchased the improvements between 1/01/2011 and 12/31/2011 and a copy of the manufacturer’s certification, which your contractor should be able to provide. Consult a tax professional for additional guidance.
Q: Does that include labor and material?
A: Improvements such as new HVAC systems, heat pumps and boilers will cover 10% of the total installed cost, both labor and material costs. For improvements on the shell of your home, (windows, doors, roofing and insulation), the tax credit covers the 10% of cost of materials only. These are subject to certain caps. For example, furnaces and boilers are eligible for $150. Windows, $200.
Q: What about renewable energy sources?
A: A 30% tax credit with NO cap is available for solar water heaters, solar panels, and geothermal heat pumps.
Q: What if I made improvements before 2011, and recieved a tax credit?
A: If you received a tax credit in years between 2006 and present, you need to calculate your aggregate credit to see if you may qualify for 2011. If you received a credit in excess of $500, you are not eligible for the 2011 credit. However, if your credit in prior years was less than $500 in aggregate, you may be eligible for the difference.
Q: When do the tax credits expire?
A: December 31, 2016 for renewable energy sources and December 31, 2011 for all other energy-efficiency improvements.
Q: Does this apply to my second property?
A: The $500 credit is avilable for the taxpayers Primary Residence only. The renewable energy credit may apply to solar water heaters, solar panels, and geothermal heat pumps in secondary homes or rentals.
Q: What about energy-efficient appliances?
A: Federal tax credits do not apply to small appliances, but local, utility, state and city credits may be available.
Q: Can I use the Federal tax credits in 2009, 2010, and 2011?
A: Yes, but the Federal tax credit has a lifetime cap of $500 on efficiency measures (you may have exceeded that in 2009 or 2010).except for renewable energy sources. Therefore, once you reach the $500 limit, you can no longer apply the tax credit.