Can You Get an Energy Credit for a New Hot Water Heater?
An energy-efficient water heater will immediately help you save money on your heating bills, as the average water heater accounts for 14 to 25 percent of the average home's energy usage, according to the U.S. Department of Energy. If monthly savings on your energy bills aren't a big enough incentive to switch to a more efficient water heater, tax credits may help influence your decision to install a more efficient unit. Several types of heaters are eligible for the energy tax credit.
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Gas, Oil and Propane Water Heaters
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Gas, oil and propane water heaters must have energy factor ratings of 0.82 or greater for a buyer to qualify for a tax credit. As of November 2010, no residential units with a storage tank met that qualifying standard, although commercial-grade heaters with a efficiency of greater than 90 percent qualify for the deduction when installed. Some tankless and gas-condensing units fueled by gas, oil and propane qualify for the credit. These types of heaters must have been installed in your home between Jan. 1, 2009, and Dec. 31, 2010, to qualify for a tax deduction.
Electric Heat Pump Water Heaters
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No electric water heaters with a storage tank or tankless electric heaters are efficient to qualify under EnergyStar standards, although electric heat pump water heaters may earn a deduction. To qualify, the new heater must have an energy factor rating of 2.0 or greater. These units must have been installed between Jan. 1, 2009, and Dec. 31, 2010, to qualify for the tax deduction.
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Solar Water Heaters
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for a solar water heater to qualify for a tax deduction, at least half of the energy used to heat water in a solar water heater must come from the sun. Only the solar portion of the heating unit qualifies for a tax deduction, not the entire heating unit itself; and this credit isn't applicable to heaters used in swimming pools, spas or hot tubs. To qualify for a tax deduction, solar water heaters must be installed between Jan. 1, 2006, and Dec. 31, 2016.
Deduction Amounts
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Homeowners must install a new heater in their primary residence to qualify for a deduction if the new water heater is gas, oil, propane or an electric heat pump water heater. Homeowners may claim deductions of up to 30 percent of the price and installation cost of the water heater, with a maximum deduction of $1,500. Owners of solar water heaters must install the new unit in a primary residence or secondary residence -- no rental properties qualify -- to receive a deduction. Homeowners may deduct 30 percent of a solar heater's cost with no upper limit to the claim.
Claiming Deductions
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To claim a deduction, a homeowner must submit Tax Form 5695 with his annual income tax forms, along with a manufacturer's certification statement to signify that the new unit meets qualifying standards.
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