Top Energy Efficient Tax Credits

Now that tax season is almost over, its never to early to think about next years taxes (unfortunately) and learn about tax credits for your home. Improve the energy efficiency of your home and save money on your taxes at the same time with these energy efficiency tax credits:

1. Fuel Cells

Fuel cells are an incredibly exciting technology that many people do not know about. A fuel cell is an electrochemical device that converts chemical energy into electricity. More technically, fuel cells use hydrogen from natural gas as fuel and through a set of reactions, converts the hydrogen fuel to electricity and emit water as a by product. In addition, the waste by product of fuel cells is water as opposed to noxious pollution produced by car engines or coal plants. Fuel cells systems can be expensive to install depending on the application. To mitigate the up front cost of installation, you can take a credit for installing it in your primary residence at 30% of the cost up to $1,000 per kilowatt of power generating capacity.

2. Solar Energy Systems

A a solar water heater or photovoltaic (solar energy) system is an excellent way to bring generating your own electricity and lowering your electric bill. Unfortunately, the up front cost of solar can be cost prohibitive. To help offset these costs, the U.S. government offers a tax credit based on 30% of the cost (including parts, labor and installation costs) of the solar system with no upper limit. Not only will you be able to benefit from low energy costs in the long term with solar power but you can recapture much of your up front investment with this tax credit.

3. Residential Wind Turbines

For those that live in open areas with lots of wind, investing in a residential wind turbine is another excellent way to generate your own electricity and permanently reduce your electric bills. A wind turbine looks essentially like a windmill but it takes wind energy and converts it into mechanical energy (with the wind turbine blades) which is then converted again (through an inverter) into electrical energy for home use. Depending on where you live and how much energy you want to generate, a typical wind turbine kit can range anywhere from $500 to $22,000 for installation. These range from small, simple roof top windmills to large wind turbines that sit a top wind towers. Again, the U.S. government offers a 30% tax credit based on the cost of the system (including parts, labor and installation costs). The tax credit applies to wind turbines installed at your primary or secondary home, whether it is new or old construction, but not on rental property. Also, the capacity must be under 100 kilowatts.

4. Windows, Doors & Skylights

Replacing your windows is a simple and effective way to make your home more energy efficient. Fortunately, the U.S. government agrees and offers a tax credit for 10% of the cost if the window, up to $200 per window. If you elect to replace your doors and skylights, you can get a 10% tax credit of the cost of the replacement up to $500 per item. There is no limit on the number of windows or doors you can replace but only the cost of the actual item is included, no labor expenses. Also, the replacement windows or doors must be Energy Star rated to qualify for the credit.

5. Non-Solar Water Heaters

Approximately 43% of your utility bill goes to heating and cooling. In fact, heating and cooling costs the average homeowner about $1,000 a year for their larger systems. One of the best ways to reduce this amount is by replacing your water heater with an energy efficient water heater. There are different types of energy efficient water heaters, however, no matter which one you choose, you will receive a tax credit for up to $300 of its cost. Remember, not all water heaters are eligible for a tax credit so make you talk with your salesman to make sure your model qualifies before purchasing.

6. Insulation

Insulation is critical to ensuring that your home is energy efficient. Insulation reduces unwanted heat loss or gain and can decrease the energy demands of heating and cooling systems. Without proper insulation, all of the energy efficient tips for your home heating and cooling are ineffective. The U.S. government offers a tax credit for 10% of the cost of the new insulation, not including labor or installation costs, up to $500. Eligible products include batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place. Products that air seal (reduce air leaks) can also qualify (such as weather stripping, spray foam in a can designed to air seal, caulk designed to air seal and house wrap) as long as they come with a Manufacturers Certification Statement.

7. HVAC Systems & Upgrades

As stated above, approximately 43% of your utility bill goes to heating and cooling, so improvements to these systems will really help you lower your energy bill.

• Advanced main air circulating fan: Get a $50 credit on the cost of a fan to more efficiently move air through your furnace and duct system.
• Air source heat pumps: Common 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, costs a lot less, and you can get up to a $300 credit on the cost of buying a system for your home.
• Central air conditioning systems: In less temperate climates, you can still purchase an energy efficient central air system and get up to a $300 credit on its cost. Your HVAC contractor should be able to provide you with a certification stating that it qualifies for this tax credit.
• Gas, propane, or oil hot water boiler: These systems provide heat through pipes in the baseboards or floorboards of a home that carry hot water…they include a $150 tax credit off its cost, which also includes installation costs.
• Natural gas, propane, or oil furnace: If you purchase an energy-efficient furnace, you’re eligible to get a credit of up to $150 of the cost of purchasing the system.
• Biomass stoves: Before the green movement, these were more often called “wood stoves.” Of course, now that you can purchase models that burn plant fibers, agricultural waste, and other items that were formerly headed for the dump, they get a fancy new name. 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%.