Energy Efficiency Tax Credits for Homeowners
Doors and Windows, Featured, Financial, Green Home, Heating and Cooling, Insulation, Repairs and Installation, Roofing by Danny Lipford
The American Recovery and Reinvestment Act (ARRA) of 2009 includes federal tax credits that can save you $1,500 or more when you make energy efficiency improvements to your home. Here’s the bottom line on what’s covered, and how you can qualify.
Who Can Qualify?
Taxpayers who make energy efficiency improvements to their principal residence during 2009 and 2010 using approved products can apply for a credit on their 2009 or 2010 federal income tax returns. A few of the improvements also qualify for a tax credit when installed on second homes through 2016.
While the energy efficiency improvement tax credit can reduce the amount you owe on your federal income tax to zero, you won’t receive a larger refund than the total amount of income tax you paid for the year. In other words, if you will already receive a full refund of your federal income tax, you will not benefit from the energy efficiency improvement tax credit.
What Home Improvements Qualify?
In order for an improvement to be eligible for a tax credit, the product used must meet certain government established criteria for energy efficiency and come with a Manufacturer Certification Statement indicating that it qualified.
There are two basic categories of tax credits, each of which allow you to deduct 30% of the cost of the improvement, depending on the type of energy saving products you install:
- Products that have a maximum tax credit limit of $1,500.
- Products with no maximum limit.
$1,500 Tax Credit
The following energy saving home improvements are eligible for a tax credit of 30% of the cost of the improvement, with a maximum limit of $1,500 for both years combined. So to receive all of the tax credit, you would need to spend a total of $5,000. Improvements must be completed and put into service between January 1, 2009 and December 31, 2010 to qualify. You may lump several different energy saving improvements together in the tax credit. Products must be installed on an existing home that serves as the taxpayer’s principal residence. Qualified improvements include:
- Insulation
- Windows and storm windows
- Exterior doors and storm doors
- Skylights
- Energy efficient HVAC systems and furnaces
- Garage doors
- Heat reflective roofing
- Energy efficient hot water heaters
- Biomass stoves (wood and pellet)
30% Unlimited Tax Credit
The following energy efficiency improvements are eligible for a 30% tax credit with no maximum limit. The work must be completed between January 1, 2009 and December 31, 2016. Unlike the $1,500 credit, these improvements can be to a primary residence or second home. Also, both new construction and existing homes are eligible. Qualified improvements include:
- Geothermal heat pumps
- Solar hot water heaters
- Photovoltaic power systems
- Residential wind energy systems
Product Requirements
To best way to be sure that the products you install meet the requirements for the energy efficiency tax credit is to obtain a Manufacturer Certification Statement stating that they qualify. Here are some general guidelines for each type of product.
Insulation
To qualify for a tax credit, insulation must:
- Be primarily used for insulation purposes.
- Be expected to last at least 5 years or carry a 2-year warrenty.
- Meet 2009 International Energy Conservation Code (IECC) guidelines.
NOTE: Only material costs qualify for the tax credit on insulation. Installation costs are not covered.
Windows, Doors, and Skylights
To qualify for a tax credit, the NFRC approved label on the product must state that it has:
- U-Factor of 0.30 or less.
- Solar Heat Gain Coefficient (SHGC) of 0.30 or less.
Deciding whether storm windows and storm doors qualify is more complicated, since their energy efficiency ratings must be combined with the IECC rating and climate zone of the window or door they cover.
NOTE: Only material costs qualify for the tax credit on windows, storm windows, doors, storm doors, and skylights. Installation costs are not covered.
Heating and Air Conditioning Systems
To qualify for a tax credit, HVAC systems must meet the following minimum energy efficiency rating or higher for Energy Efficiency Ratio (EER), Seasonal Energy Efficiency Ratio (SEER), Heating Seasonal Performance Factor (HSPF), and Annual Fuel Utilization Efficiency (AFUE):
- Split Air Conditioner: EER 13 & SEER 16.
- Package Air Conditioner: EER 12 & SEER 14.
- Split Heat Pump: EER 12.5, SEER 15, & HSPF 8.5.
- Package Heat Pump: EER 12, SEER 14, & HSPF 8.
- Gas or Propane Furnace: AFUE 95.
- Oil Furnace: AFUE 90.
- Gas, Propane, or Oil Hot Water Boiler: AFUE 90.
- Geothermal Heat Pump: Must meet Energy Star requirements.
- Biomass Stove: Thermal efficiency rating of 75%.
NOTE: Both installation and material costs qualify for the tax credit on heating and cooling systems.
Garage Doors
To qualify for a tax credit, a garage door must:
- Be installed on an insulated garage.
- Have a U-Factor of 0.30 or less.
- Solar Heat Gain Coefficient (SHGC) of 0.30 or less.
NOTE: Only material costs qualify for the tax credit on garage doors. Installation costs are not covered.
Heat Reflective Roofing
In order to qualify for a tax credit, roofing must:
- Meet government Energy Star requirements for heat reflective roofing.
- Be expected to last at least 5 years or carry a 2-year warrenty.
NOTE: Only material costs qualify for a tax credit on roofing. Installation costs are not covered.
Hot Water Heaters
To qualify for a tax credit, hot water heaters must:
- Gas, Oil, or Propane Water Heater: All Energy Star approved tankless models. No storage tank models qualify.
- Electric Heat Pump Water Heater: Energy Star approved models.
- Solar Water Heater: Energy Star approved models that are not used for swimming pools or hot tubs.
NOTE: Both installation and material costs qualify for the tax credit on hot water heaters.
Solar and Wind Power Systems
In order to qualify for a tax credit, solar and wind powers systems must:
- Provide electricity for the residence.
- Meet required fire and electrical code requirements.
NOTE: Both installation and material costs qualify for the tax credit on solar and wind power systems.
Products that Do Not Qualify
The following items are not covered under the tax credit:
- Ceiling fans
- Clothes washers and dryers
- Dishwashers
- Electric tankless water heaters
- Programmable thermostats
- Refrigerators
- Room air conditioners
For more information on whether a product qualifies for the energy efficiency tax credit, contact the manufacturer. For detailed tax information, contact the Internal Revenue Service at 1-800-829-1040 or your tax accountant.
Further Information
- Federal Tax Credits for Energy Efficiency (Energy Star)
- Consumer Energy Tax Incentives (Dept. of Energy)
- American Recovery and Reinvestment Act (EERE)
11 Comments on “Energy Efficiency Tax Credits for Homeowners”
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April 16th, 2009 at 14:48
Great article, Danny. Homeowners need to know that the DOE Building Technologies Program has a multi-year plan to move toward zero energy homes by 2020, and the need for energy conservation in our homes is at the top of the list.
For those who want the details, there’s great information at
http://www.eere.energy.gov/
And I’ve been blogging about tax credits specifically for windows and doors at http://askmrrogers.com/category/tax-credit.
April 29th, 2009 at 19:47
I hope a lot would be entice to try save energy since they would benefit from it twice-a tax refund and paying less in their electricity consumption. Gerry, its 11 years from now, I hope we would push thru with the zero energy for homes and thus save mother earth from further destruction.
July 14th, 2009 at 13:12
Is there a tax credit or some type of incentive for replacing galvanized piping?
Ben Erickson Says:August 4th, 2009 at 12:15
Hi John,
I don’t know of any tax credit that is available for replacing galvanized plumbing.
September 29th, 2009 at 17:50
My new basement bathroom installation will have 2 exterior walls which are mostly underground. Even though I have never had any seepage or moisture problems with these bare walls (I did paint them with white UGL to lighten up the walls, not to prevent moisture from entering) and the area where I am installing the bathroom is not really cold in winter, should I insulate and put a vapor barrier between the framing members along these exterior walls? I have never had a major moisture problem in my walk-out basement so far and even had a home inspector in to look at some mildew on a wall in one room which he determined was caused by interior condensation and lack of ventilation in that room. (I have a dehumidifier in that room now.)
If I do need to insulate, what r-value insulation should I use? Would that type of insulating job qualify for the tax credit if I buy the proper rated insulation? Should I use a vapor barrier between the insulation and the drywall?
February 18th, 2010 at 13:40
In regards to new construction home credits, the home items such as windows, skylights etc will qualify if you payed additional to have the better low-e energy models installed above and beyond what the builder would have installed originally. I just got off the phone with the irs for confirmation; and this is covered on their form 5695 online.
March 22nd, 2010 at 07:57
I just purchased a JeldWen window from Home Depot yesterday. I was told it would qualify for the tax credit. After installation, we took the NFRC label off the window to go to the web site for the tax credit. The U factor on our window is 0.32. As I read the information it has to be less than 0.30. I am very disappointed that Home Depot misrepresented this product.
May 3rd, 2010 at 15:34
Are any new roofing materials eligible for a tax rebate on a second home?
Ben Erickson Says:May 4th, 2010 at 07:15
Hi Susan,
No, the tax credit for energy efficient roofing only applies to your primary residence. The only items eligible for the tax credit on secondary or rental homes are: geothermal heat pumps, solar hot water heaters, photovoltaic power systems, and windmills.
July 10th, 2010 at 13:48
Is there any federal tax credit for insulation and/or furnace replacement for a rental property? If not, is there any in the legislative pipeline?
Ben Erickson Says:July 12th, 2010 at 08:37
Hi Michael,
As far as I can determine, none of the federal energy efficiency tax credits apply to rental properties, nor have I heard of any pending legislation for them.