Tax Credit for Appliances & Efficient Upgrades
Unless Congress extends them, tax credits for energy-efficient upgrades are disappearing fast. Many credits that have been in existence since 2006 will end on Dec. 31, 2011. Credit amounts have been reduced for the 2011 tax year. In 2009 and 2010 most energy credits were capped at $1,500. For 2011, that same cap is limited to $500. A few unrestricted credits aimed at whole-house alternative energy systems survive until the end of 2016.
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2011 Energy Credits
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Although energy-efficient appliances such as refrigerators, stoves and dishwashers do not qualify for a federal tax credit under current legislation, some heating and cooling systems, non-solar water heaters and biomass heating stoves do meet the requirements for an energy-efficiency tax credit. Other energy upgrades that qualify for the tax credits, as long as they are in place and operating by the end of the 2011 tax year, include certain insulation and roofing products, along with specific windows, doors and skylights.
2016 Energy Credits
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You can reap unlimited tax rewards with the installation of qualified alternative energy systems. Credits expire at the end of 2016 for installation of geothermal heat pumps, solar energy systems and wind energy systems. Restricted credits are also available for the installation of residential fuel cell systems with a capacity of at least .5 kW.
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Credit Limits
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For the 2011 credits, you can get a credit of $300 for installing a biomass stove. Credits for central air conditioning systems, non-solar water heaters and electric heat pumps are also limited to $300. If you install an energy-efficient furnace or boiler, the credit is limited to $150. The installation of an advanced main air-circulating fan reaps a $50 tax credit. You can get a 10 percent credit, up to $500, if you install certain insulation or use energy-efficient roofing materials to re-roof your home. There is a $500 limit on energy-efficiency credits that applies to any credits taken from 2006 through 2011. Installation costs do not qualify toward the credits that expire in 2011.
For the 2016 credits, you can claim 30 percent of the cost, including installation, for a geothermal heat pump, solar energy system and wind energy system. Fuel cell systems qualify for the 30 percent credit as well, but the final credit is restricted to $500 per .5 kW of power capacity. The credits that expire in 2016 have no upper limit amount.
Claiming the Credits
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To claim the credits, you must have installed products or systems that bore the manufacturer’s certification that the equipment qualified for the federal income tax credit for energy efficiency. Additionally, the 2011 credits only apply to your existing, primary place of residence. You cannot use the credits for rental properties, a second home or new construction. The 2016 credits may be used for your existing principal residence, new construction or a second home. You cannot claim the credit for a rental property. Keep in mind that not all Energy Star products qualify for the tax credit. Use Form 5695 to claim energy-efficiency credits, and file the form along with Form 1040 when submitting your federal income tax return. Check out your state’s taxing agency for information about possible state income tax credits for energy-efficient home or appliance upgrades.
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