Tax Breaks for Energy-Efficient Appliances
Installing a new appliance in your home can be a hassle in terms of time and expense. However, it is possible to make such an expense work in your favor. Homeowners can take advantage of tax breaks when purchasing energy-efficient appliances, thus reducing the overall expense required to make the purchase.
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Qualified Appliances and Improvements
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While appliances appear to be generally the same, they differ from model to model with regard to energy consumption and efficiency. These differences have a large impact on your household's utility costs and whether you qualify for tax credits that lower the costs of purchasing the appliance.
Qualified appliances include: freezers, refrigerators, room or central air conditioners, washing machines, dishwashers, furnaces, boilers, heat pumps and water heaters. Other materials to improve the home heating envelope, such as roofing, insulation, doors, windows and skylights may qualify.
Appliances must have an EnergyGuide label affixed that states the expected annual energy consumption and where that consumption lies in the range of models within that appliance classification. Compare models to decide what appliance yields the most savings. Many of the appliances and items that qualify as energy-efficient for the purposes of tax credits have received the U.S. Department of Energy's "Energy Star" rating; however, you should confirm that the specific item qualifies for a tax break before finalizing your purchase.
Eligible Amounts
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For the 2009 and 2010 tax years, individuals can receive a maximum credit of $1,500 per tax year for eligible energy-saving improvements. A heating/air-conditioning system, water heater, stove, window, skylight, door, insulation or roof classified as "energy-efficient" qualifies for the credit, along with the labor costs required for installation.
The credit calculation generally is 30 percent of the costs listed, so the maximum amount of cost that you can use to determine a credit would be $5,000. In addition to purchase and installation costs and tax breaks, you should observe and compare the expected energy usage, as the long-term return on investment actually may be greater by purchasing a more expensive appliance.
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Filing for Tax Breaks
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To file for a tax break on an energy-efficient appliance, list the purchase on your tax return by filing IRS Form 5695. The cost of purchasing a high-efficiency appliance, along with the cost of labor required to install the appliance, is deductible. Enter the final amount generated from filling out this form on your 1040 tax return, on line 52, as "Residential Energy Credits."
In addition, your purchase may qualify for rebates from manufacturers or from your local utility company. Be sure to determine if the model you intend to purchase qualifies for any user discount and/or rebate from your local power, water or gas supplier.
Eligibility for Tax Breaks
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Your eligibility for this tax break does not depend on whether you itemize your deductions each year. The property itself and the work done determine eligibility. The facility must be a residence, used at least 80 percent of the time for non-business purposes. To be fully considered for a tax credit, the appliance must be for your primary residence; if it is not, only a percentage of the purchase and installation costs may qualify.
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References
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