Tax Credit for Installing Blown-In Insulation

Installing insulation can reduce your heating and cooling bills.

Even though the amounts have been substantially reduced with recent legislation, tax credits are still available for making energy efficient upgrades to your principal place of residence. Energy credits available as of the date of publication include everything from a $50 credit for installing an advanced main air circulating fan on your furnace to 30 percent allowances for the purchase and installation of a wind turbine system that powers your entire home.

Insulation Requirements

To receive an energy efficiency tax credit, you must install insulation materials designed specifically to reduce the loss of heat from your home. The insulation’s primary purpose must be to insulate. For instance, if you install insulated siding on your home, it does not qualify for the credit because the primary purpose of the siding is to re-side your home, not insulate it. To receive the tax credit, the insulation you purchase must meet the 2009 International Energy Conservation Code and Amendments.

Types of Insulation

You can take the energy credit for blown-in insulation products. The U.S. Department of Energy, which regulates the standards for the products acceptable for the energy tax credits, accepts loose-fill insulations that include cellulose, fiberglass and mineral wool. Other less common, but also acceptable forms include polystyrene beads and a combination of vermiculite and perlite. Other forms of acceptable insulation include blanket batts or rolls, foam board or rigid foam or sprayed foam.

Insulation Credit

You can get an energy tax credit of 10 percent of the cost, up to $500, for the purchase of insulation material for your existing primary residence. The credit does not apply to a second home or a rental property. In addition, labor does not qualify as part of the total cost to which the credit applies. This credit is only available through Dec. 31, 2011 with a lifetime cap of $500 in energy credits. If you claimed energy credits before the 2011 tax year and the credits totaled $500, you cannot claim energy credits for energy upgrades that expire in 2011.

Considerations

If you missed an energy tax credit in 2009 or 2010, you can still take the credit by filing an amended income tax return. Use Form 1040X to correct a prior year’s return. If you correct your federal income tax return, the resulting change in figures could impact your state return as well. Consult with your state tax authority to determine whether or not correcting a return is necessary. Use Form 5695 to take the energy tax credit applicable to your energy upgrade. To claim the energy credit this year or for a prior year, the energy efficient product must be placed in service by December 31 of the tax year in question.

References

• Energy Star: 2011 Tax Credits for Consumer Energy Efficiency
• Energy Savers: Products Eligible for Tax Credits Through 2016
• Energy Savers: Products Eligible for Tax Credits Through 2011
• Energy Savers: Loose-Fill Insulation
• Energy Savers: Tax Credits for Energy Efficiency
• Energy Star: How Do I Apply for the Tax Credit?
• IRS.gov: Instructions for Form 1040X
• IRS.gov: Nine Facts on Filing an Amended Return
• Darwin’s Money; Energy Tax Credit 2011 – Not What it Used to Be; December 2010

Resources

• IRS.gov: Form 5695 Residential Energy Credits
• Energy Star: Tax Credit Legislation
• IRS.gov: Energy Incentives for Individuals in the American Recovery and Reinvestment Act
• U.S. Department of Energy: Database of State Incentives for Renewables & Efficiency