Energy Tax Credit for Energy Efficient Home Improvements
On December 17, 2010 President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 into law. This law extends the tax credits for energy efficiency into 2011, BUT at lower levels. The following summarizes the Act as it relates to the products we sell and should address any questions you may have. Feel free to contact us if you need additional information.
How much is the Tax Credit
10% of the cost of the goods, subject to a maximum $500 ceiling (certain items are capped at an amount lower than $500). The credit cannot be applied against the cost of installation – only against the cost of the products.
How the Tax Credits Work
- The tax credit for windows is capped at $200 and windows must be ENERGY STAR certified to qualify for the tax credit.
- The Act covers energy saving home improvements. This is not to be confused with Energy Star rated products. To qualify for the Tax Credit, products must meet more stringent requirements than the Department of Energy has mandated for the Energy Star Program. Windows and Doors, for example, must have a U-factor and Solar Heat Gain Coefficient (SHGC) less than or equal to 0.30. The lower the U-Value the better insulation a window provides.
- Qualifying home improvements must be installed and ready for use between January 1, 2011 and December 31, 2011 at the homeowner’s principle place of residence. The tax credit is a one-time only credit. In other words, if a homeowner got over $500 in these tax credits from 2006 - 2010, then they are not eligible for anything more.
- However, a number of energy-efficient home improvement products, such as certain solar-related products, have their own tax credits that are separate from the windows and doors tax credit.
How to Claim the Credits
Homeowners seeking to claim one or more of the available tax credits should complete IRS Form 5695 for the tax year in which the improvement is placed into service. For record keeping purposes, it is advisable for homeowners to retain the work orders or receipts for the qualifying improvement. Taxpayers should also keep a copy of the Manufacturer Certification statement (a signed statement from the manufacturer certifying the product qualifies for the Energy Tax Credit) for their records, although the statement does not have to be submitted with the taxpayer’s tax return.
For more information on the 2011 tax credits please refer to the U.S. Department of Energy’s Energy Saver web page.