How to Receive Tax Credits When Refurbishing a Home

Make smart decisions when refurbishing your new home. When replacing outdated appliances, look for the Energy Star seal. When remodeling your home, look for energy-efficient heating and cooling, windows, doors, skylights and water heaters. The US government is offering a tax credit for a variety of energy-efficient building materials for homeowners to encourage investment in energy-saving products. Energy-efficient products conserve energy and reduce costs to consumers by using the latest energy-conservation materials available.

Things You'll Need

• List of building materials that meet tax credit standards
• Receipts for all building materials
• Manufacturer Certification Statement for eligible products

Instructions

Remodel Wisely

1. Invest in the US energy conservation movement. Purchase green building materials when remodeling your home. The American Recovery and Reinvestment Act of 2009 has introduced new energy-efficient tax credits for many standard items necessary in home remodeling. A maximum tax credit allowance of $1,500 or 30 percent of the cost for eligible items is allowed in most circumstances.

2. Make sure you understand which energy-efficient products are not limited to the $1,500 tax credit cap. These products include: photovoltaics, geothermal heat pumps, small wind systems, fuel cells and solar water heaters. Each of these products must meet specific product energy requirements to qualify for a tax credit. Requirements vary from product to product. Not all Energy Star-certified products are eligible for deductions (see Resources below).

3. Keep records of all qualifying energy-efficient products. Save all receipts for your tax records. Manufacturers should provide a Manufacturers Certification Statement for eligible products. Retain this information for your records as well.

4. File for a tax rebate when completing tax returns. IRS Tax Form 5695 should be ready for use when filing 2009 taxes.

Tips & Warnings

• This new tax credit replaces the previous tax credits allowable as set in the Energy Policy Act of 2005. The old policy limited tax credit to a maximum of $500. The new tax credit limit was increased to $1,500. This is a particularly valuable tax savings. Tax credits are a substantially better benefit than a tax deduction. A tax credit of $1,500 will actually lower your taxes by $1,500. Expenses eligible for a tax deduction of $1,500 with result in only a small portion of the $1,500 to be returned to the consumer.

• This report is meant to serve as a general guideline. Always consult with a tax professional to receive the most up-to-date tax information.

Resources

• Products Qualifying for Tax Credit