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Tax credit for certain energy saving home improvements

Posted by Andrew Chan  August 19, 2010 03:30 PM

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Under the American Recovery and Reinvestment Act of 2009, the tax credit for making energy efficient home improvements was increased and extended. The new law allows homeowners to receive a credit of up to 30 percent for qualified energy efficient home improvements through 2009 and 2010. The credit is limited to $1,500 for 2009 and 2010 combined.

Here are some key points from the IRS to consider about the tax credit if you are planning on making energy efficient improvements:

* The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

* To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.

* Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers’ web site.

* Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.

* The improvements must be made to the taxpayer’s principal residence located in the United States.

* To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made. Form 5695 is available at http://www.irs.gov/pub/irs-pdf/f5695.pdf.

For more information about this tax credit, visit the IRS web site at http://www.irs.gov/newsroom/article/0,,id=211307,00.html.

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