The American Recovery and Reinvestment Act (Recovery Act), enacted earlier this year, expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit. Eligible homeowners can claim both of these credits when they file their 2009 federal income tax return. Note that these credits are not refundable and the credit either reduces the tax owed by the taxpayer or increases the refund of a taxpayer. An eligible taxpayer can claim these credits on Form 5695, regardless of whether he or she itemizes deductions on Schedule A.
- Nonbusiness Energy Property Credit
This credit is available on a homeowners expense on eligible energy-saving improvements. Tax credits are available at 30{eb914d8c00d6b744d02a9a8064b0bfd5c559be7136358887c29ad495da2b8d17} of the cost, up to $1,500, in 2009 & 2010 (for existing homes only). 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.
So an expense of $5,000 before the end of the year on eligible energy-saving improvements can save as much as $1,500 on a taxpayer’s 2009 federal income tax return. - Residential Energy Efficient Property Credit
This credit is available on investment in alternative energy equipment. Tax credits are available at 30{eb914d8c00d6b744d02a9a8064b0bfd5c559be7136358887c29ad495da2b8d17} of the cost, with no upper limit through 2016 (for existing homes & new construction) for the amount spent 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.
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 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.