9 Green Energy Tax Credits for Home Improvement & Energy Efficiency

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You probably know that you can save money on your utility bills go green tax creditsby making your home energy efficient. But you might not know that many energy-efficient upgrades can reduce your taxes as well.

In fact, there are a range of federal tax credits available that run the gamut from installing a geothermal heat pump to installing new insulation. If you’ve recently made improvements to your home, or are considering it, check the list of available tax credits and make sure to claim the ones you qualify for.

Green Energy Tax Credits

1. Fuel Cells

Fuel cell systems are the newest clean energy technology, converting stored fuel into electricity and/or heat. They significantly reduce the amount of carbon dioxide your home produces, thus shrinking your home’s carbon footprint to about one-third that of a normal home. However, fuel cell systems are often very expensive to purchase (approximately $50,000) and install (up to $4,000). To help offset the cost, you can take a credit of 30% of the cost to install a system in your primary residence, up to $500 per kilowatt of power generating capacity. This credit is good through 2016.

2. Solar Energy Systems

If you live in a sunny region, a solar water heater or photovoltaic system might be the ticket to lower energy costs. Installing a solar system allows you to take a credit of 30% of the cost of both the purchase and installation, with no upper limit. To qualify, the solar water heater must be certified by the Solar Rating and Certification Corporation and must be used for home water needs (as opposed to for an outdoor swimming pool). Solar photovoltaic systems must provide electricity for your home and meet local electrical and fire codes. This credit is good through 2016.

3. Residential Wind Turbines

If you live in a windy area, a small wind turbine is one way to generate electricity for your home. You can receive the tax credit for a turbine installed at your primary or secondary home, whether it is new or old construction. However, you cannot receive a credit for a turbine installed at a rental property. Also, the capacity must be less than 100 kilowatts, since it would be difficult for most homes to use that much electricity. This tax credit is worth 30% of the cost of parts, labor, and installation, and is good through 2016.

4. Geothermal Heat Pumps

With a geothermal heat pump, any landowner can access the natural heat emitted by the earth’s core and use it for energy needs. Understandably, the pump and installation can be costly ($30,000 is not unheard of). But you can get a tax credit for up to 30% of the cost of parts, labor, and installation with no upper limit, and the credit can be taken any time through 2016.


General Improvements

If you’ve installed any of the items below, you may be eligible to receive a credit. However, upgrades must apply to your primary residence; you cannot get deductions for improvements to rentals or new construction. Each deduction is applicable through the end of 2013.

5. Windows, Doors & Skylights

If you replace doors, windows, or skylights with energy-efficient models, you may be eligible to get a tax credit. You can receive 10% of the cost of windows, up to $200 per window. You can also receive 10% of the cost of doors and skylights, up to $500 per item. To calculate your credit, you can only include the cost of the item and not the cost of labor. Items must be ENERGY STAR qualified in order to claim the credit, so check with a salesman before making your purchase.

6. Non-Solar Water Heaters

If you’re not ready to go solar, but still need a new water heater, get an energy-efficient model and get a tax credit for up to $300 of its cost. (If the water heater cost less than $300, you can only get a credit for its actual cost.)

7. Reflective Roofs

Paint your metal roof with an approved reflective paint or use approved reflective granules on your asphalt roof, and your home’s temperature will decrease along with your tax bill. You can get a credit for 10% of the cost of materials up to $1,500. Installation costs are not included.

8. Insulation

Adding extra insulation to your home can be an effective way to lower your heating and cooling bills. Various types of insulation can be used to claim the credit, including fiberglass, polystyrene foam boards, or spray foam. You can get a credit for 10% of the cost of the insulation (not including labor or installation costs) up to $500.

9. HVAC Systems & Upgrades

Your heating and cooling systems use a lot of gas and electricity in your home. Therefore, improving their efficiency can reduce your bills substantially and net you a tax credit.

  • Advanced Main Air Circulating Fan: Get a $50 credit for purchasing a fan to more efficiently move air through your furnace and duct system.
  • Air Source Heat Pump: A popular option in moderate climates, this system moves air between the outside and inside of your home to heat it in the winter and cool it in the summer. It’s up to four times more efficient than a regular HVAC system and costs a lot less. You can get a credit of up to $300 for purchasing a system.
  • Central Air Conditioning Systems: If you do not live in a moderate climate, you can still purchase an energy-efficient central air system and get up to a $300 credit based off its cost. Your HVAC contractor can provide a certification stating whether your system qualifies.
  • Gas, Propane, or Oil Furnace, or Hot Water Boiler: If you purchase an energy-efficient furnace or hot water boiler, you’re eligible to get a credit of up to $150 based off its cost.
  • Biomass Stoves: Before the green movement, these were more commonly called “wood stoves.” However, you can now also purchase models that burn plant fibers, agricultural waste, and other items that were formerly headed for the dump. You can get a $300 tax credit on the cost of purchasing a new stove, as long as its thermal efficiency rating is at least 75%.

Final Word

It’s a win-win situation when you realize that saving the environment call also help you save money. When you upgrade your home, go the energy-efficient route to reduce energy bills and your taxes. Don’t forget to check with the salesman to make sure you buy the correct equipment to qualify for available tax credits.

Did you make any energy-efficient home improvements this year? Which credits are you claiming?

  • http://www.drenergysaver.com DrEnergySaver

    Excelent article, Kira!

    Let me just add that Congress extended the Federal Tax Credit for Home Energy Efficient Upgrades to the end of 2011.
    They made I few changes but basically, homeowners can claim credits for energy efficient projects and purchases made before December 2011.

  • http://www.searsheatingcooling.com Angela Haynes

    Great info! Columbia Gas has some great programs for their customers right now. They include home energy audits and rebates on qualifying upgrades including programmable thermostats.

  • Mary J

    I am a resident of Ca and live with our daughter we do not own a home in Ca but bought a home in Az for vacation and retirement. Can we deduct energy credit from that home?