Tax credits for saving energy: Do you qualify?
Rebecca Blocker, MS
Housing & Environmental Design Specialist
The new energy tax credit is a win–win opportunity. When you buy qualifying products to improve your home’s energy efficiency and lower your utility bills, the IRS will give you a tax credit of up to $500. The credits are only available for two years, so now is the time to make your home more energy efficient.
You may already have made purchases in 2006 that will save on your taxes this year. Energy-saving home improvements, including adding insulation, replacement windows, exterior doors, and high-efficiency heating and cooling equipment, may qualify for a combined maximum credit of $500 for the two years. Qualifying solar panels and water heating systems are eligible for a 30 percent credit up to $2000.
Energy saving purchases for your home must be put into service between January 1, 2006, and December 31, 2007.
Products that qualify for the tax credit must have a manufacturer’s certification. You will find it provided with the packaging, or in printable form on the manufacturer’s website. You do not need to send the certification in with your taxes, but you must retain it for tax recordkeeping.
Look for home improvement products with the Energy Star label, a sign of high-energy efficiency and quality. Although they may cost a little more, they will pay you back in lower energy bills. Not all Energy Star-rated products qualify for the tax credit. The credits are only for the highest-efficiency products that may be more expensive. Even if an Energy Star product does not qualify for the credit, it will still save you money on utility bills in both summer and winter.
For more information, contact your local University Extension office, the IRS Web site on Energy Tax Credit (www.irs.gov/pub/irs-drop/n-06-26.pdf), the 2006 IRS Tax Guide, or Energy Star (www.energystar.gov).