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Federal Tax Credits for Residential Energy Efficiency Are Back

Posted on Tue, Jan 29, 2013

Tax Credit Extension resized 600
This article was written by Tung Huynh

Homeowners who plan to make energy-efficient improvements to their primary residence can once again take advantage of the federal tax credits for residential energy efficiency that expired at the end of 2011. Yes, thirteen months way back.

As part of the effort to avert the fiscal cliff on the eve of the New Year, Congress passed legislations that include the reinstatement of the popular energy efficiency tax credits under the American Taxpayer Relief Act. The tax break, which allows homeowners to claim credits of varying amounts on improvement such as insulation, energy-saving windows, and highly efficient heating and cooling systems. The tax credits were extended to the end of 2013 and also made retroactive to January 1, 2012. This means projects begun in both 2012 and 2013 will qualify.

The credits can account for 10 percent of cost of qualifying energy efficiency measures and up to a cap of $500 (excluding installation cost).
·       10 percent of cost of insulation materials and systems
·       10 percent of cost of qualifying exterior doors and windows, including skylights (cap at $200)
·       10 percent of cost of pigmented and asphalt roofs designed to reduce heat gain and keep building cool
·       $50 main air/ furnace ventilating fan
·       $150 for a natural gas, propane or oil furnace or hot water boiler with an annual fuel utilization efficiency rate (AFUE) of 95 percent or greater
·       $300 for an electric heat pump water heater with an energy factor of at least 2.0.
·       $300 for a highly efficient electric heat pump.
·       $300 for a highly efficient central air conditioner.
·       $300 for a natural gas, propane or oil water heater with an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent.
·       $300 for a biomass stove.
The tax credits reduce the total amount in tax you owe dollar by dollar. Basically you can easily get up to $500 toward the remodel project. You claim it on Form 5696 when you file your tax return.

One important caveat to point out here is the tax credits are capped at $500, meaning that the cumulative tax credits amount that can be claimed by each household dating back to previous tax years cannot exceed a total of $500. So if you have taken a credit up to a total of $500 in 2009, 2010, and 2011, you are tapped out and are no longer eligible. However, if you only took a portion of this amount, now is the time to take the advantage of the renewed tax credit.

Learn more about the different energy efficiency incentives available to you in your region by checking out 360Chesnut's Profit page.

Download our whitepaper on federal incentives below to learn more what are eligible for tax credits and start taking advantage of saving opportunities toward the cost of your home energy efficiency and renewable energy projects. 

Source: energystar.gov; dsireusa.org