Energy Saver Tax Credits for Tankless Water Heaters

Tankless water heater installations may reduce your tax liability for 2011.

The federal government offers tankless water heater tax credits to encourage energy efficiency. Tankless water heaters perform in a more environmentally friendly way than tank-type water heaters. Take advantage of energy tax credits, which help make cutting-edge tankless technology more affordable. Tax credits with tricky stipulations exist for homeowners who purchase qualifying tankless water heaters in 2011.

Which Models Qualify for the Energy Saver Tax Credit?

Manufacturers of tankless water heaters often post online lists detailing which models qualify for the energy saver tax credit for the 2011 tax year. For instance, Noritz's website lists numerous tankless water heaters that qualify for the energy saver tax credit. While you are exploring the possibilities, check the rest of this webpage to determine if you also qualify for any of the state or Canadian rebate programs in addition to the tax credit.

Which Tankless Water Heaters Qualify?

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, signed into law on December 17, 2010, determines which energy-efficient, residential tankless water heaters qualify for the tax credit. The tankless water heaters must have an Energy Factor of at least 0.82 or a thermal efficiency of at least 90 percent. The maximum credit for tankless water heaters is $300.

When Must I Buy? What Is the Maximum Credit for a Tankless Water Heater?

Any qualifying tankless water heater installed from January 1, 2011 through December 31, 2011 qualifies as a tax credit on your 2011 federal tax return. You may claim 10 percent of the full purchase and installation price of a qualifying tankless water heater up to a maximum of $300. A $3,000 purchase including installation fees earns you the full $300 tax credit, for example.

What Is the Maximum Tax Credit for All Qualifying Installations?

The $500 cap on this tax credit applies to all qualifying credits you have taken advantage of from the 2006 tax year through the 2011 tax year. For instance, if you claimed a $100 tax credit in 2007 for the purchase and installation of a $1,000 qualifying air-conditioning unit (10 percent of $1,000), you still have $400 of this one-time $500 credit available for the year 2011. To qualify, the tankless water heater must be installed in the taxpayer's principal residence in the United States

How Do I File for the Tax Credit?

This tax credit only applies to purchases for an existing home -- not to tanks being installed in a new home. Save your receipt for proof of how much you spent when purchasing and installing your qualifying tankless water heater. Get a copy of your manufacturer's certification document. Often, it can be downloaded from the Internet. Use the 2011 version of IRS Form 5695 when filing your federal income tax return. Consult a qualified tax professional before you buy to get advice on which models qualify and whether you qualify for all or part of the $500 potential tax credit for 2011.

References

• Noritz: Energy Tax Credits Are One Way To Save By Going Tankless!
• Rinnai: Federal Tax Credits Extended for 2011

Resources

• Takagi: Tax Credit / Rebates
• U.S. Department of Energy: Energy Savers: Demand (Tankless or Instantaneous) Water Heaters;