Primary Home Upgrades Qualify for Tax Credit

Federal tax credits are available for homeowners making energy efficiency improvements to their existing primary homes as part of the American Recovery and Reinvestment Act of 2009.

Tax credits of up to $1,500 are available for existing homes in 2009 and 2010 for windows and doors, insulation, metal and asphalt roofs, heating, ventilation and air conditioning systems (HVAC), non-solar water heaters and biomass stoves. These improvements must be placed in service between Jan. 1 and Dec. 31, 2009. The tax credit for HVAC, biomass stoves, and non solar hot water heaters is 30 percent of the cost of the product and installation of those products in the home up to $1,500.

Tax credits for windows, doors, insulation, and roofs are 30 percent for the materials only up to $1,500. It does not include the cost of the installation for these items. The roofs that qualify are the metal roofs that have reflective qualities or the asphalt roofs that have “cooling granules.” These roofs are specially designed to reduce the heat gain in the house thereby reducing the cooling costs.

If you are building a new home, you cannot qualify for the tax credit for windows, doors, insulation, roofs, HVAC, or solar water heaters.

Tax credits are available up to 30 percent of the cost with no upper limit through 2016 for existing homes and new construction for geothermal heat pumps, solar panels, solar water heaters, small wind energy systems, and fuel cells. This tax credit is available for tax payer’s primary homes as well as secondary homes.

These items, along with appliances and homes, are rated by Energy Star, a joint program between the U.S. Environmental Protection Agency and the U.S. Department of Energy.

Energy Star has rating systems for various products to help the consumer make more educated choices when they are shopping for homes or household products. For homeowners planning to make substantial improvements to their homes, Energy Star offers tools and resources toward reducing energy costs and improving home comfort. The Environmental Protection Agency and the U.S. Department of Energy set energy efficiency guidelines for various products.

Not all products that are Energy Star rated qualify for the tax credit. The tax credits are available for the products that have the highest Energy Star ratings. These products generally are those that also cost the most. In order for the home improvement to qualify for the tax credit it must have a manufacturers certification statement.

Taxpayers should save all their receipts and the manufacturer certification statement for record keeping. Improvements made in 2009 will be claimed on your 2009 taxes using the 2009 version of IRS form 5695.

If you have any questions about whether home upgrades you are planning qualify for these tax credits, refer to the IRS website and search for form 5695, or ask your tax professional.