Federal Tax Credits for Energy Efficiency
The American Recovery and Reinvestment Act of 2009 (ARRA) extends, expands, and simplifies the federal income tax credits for homeowners who make energy efficiency home improvements. The law extends the consumer tax benefits for another year, through 2010; triples the total available tax credit from $500 to $1,500; and increases the tax credit to 30 percent of the cost of each qualified energy efficiency improvement.
With the extended legislation, home owners can receive tax credits for installing energy-efficient windows, doors, roofing and insulation as well as furnaces, air conditioners and heat pumps. Details on qualifying improvements are available here at the Energy Star website.
What is a tax credit? You don’t receive an income tax credit when you buy the product, like an instant rebate. You claim the credit on your federal income tax form at the end of the year. The credit then increases the tax refund you receive or decreases the amount you have to pay.
Tax credits vs. tax deductions: In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar-for-dollar. Tax deductions – such as those for home mortgages and charitable giving – lower your taxable income. If you are in the highest 35-percent tax bracket, the income tax you pay is reduced by 35 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit.
What do I need to do to get the tax credit? You will need to file IRS Form 5695 with your taxes. In addition, you will need to keep at least receipts proving that you purchased the improvements and a copy of the manufacturer’s certification. Accountants and tax advisors should also be able to provide more guidance.
IMPORTANT:
Home owners should retain records that include product information and a certification statement from the manufacturer indicating how the product qualifies for the tax credit.
Click here to learn more about all qualifying tax credit products and specifications.
Download this Owens Corning Manufacturer’s Certification Document, fill it out, and take it, along with all receipts or itemized bills showing the amount spent on insulation materials between January 1, 2009 and December 31, 2009, to your tax professional to the claim the credit.
