Summary: If you want to make energy efficiency improvements to your home, you’re in luck. The IRS is actually offering you some incentives to do so. However, there are some caveats if you use these tax breaks. What you plan has to qualify for these tax tricks, so make sure they do qualify before you do them if you expect this tax credit from the IRS.

If you want to improve your home’s energy efficiency, the federal government wants to help. Uncle Sam does offer some tax credits to improve your home’s energy efficiency, but there are some strings attached to them. Still, it’s a tax credit, which may benefit you.

One of the first things you need to know is that these credits can only total 30% of your expenditures and can include (for existing homes) metal roots, windows and doors, asphalt roads, insulation, heating and air-conditioning systems, ventilation, biomass stoves, and non-solar water heaters; the credit is up for up to $1500 over a two-year period, for the tax years 2009 and 2010. The credit does not apply to each year. Each adult owner of the home also CANNOT qualify for a separate tax credit each, unless they file their tax returns separately; for example, if they are married or living together and file separate tax returns, they may receive two such $1500 tax credits, in some cases.

There are also longer-term and unlimited tax credits (30% of the cost, with no upper limit through 2016 for existing homes & new construction) for geothermal heat pumps, solar water heaters, small wind energy systems, solar panels, and fuel cells. However, the tax credit for fuel cells is limited to $500 per .5 kW of power capacity.

Installation credits also only apply to doors, insulation, roofs and windows.

The tax credit can only be claimed for up to what you owe in taxes. That means, if you all after deductions have been accounted for, the credit cannot be claimed. If you don’t owe “enough” taxes to claim the credit, you can’t carry over the credit unless you qualify for longer-term items as described above.

However, you CAN claim the unlimited credit AND the $1500 credit if you meet the requirements for both.

Next, you will need to ensure that what you are doing qualifies for the credit. It’s best to check with the company (or the manufacturer’s web site) to ensure that they can provide a “Manufacturer’s Certification Statement.” The MCS is a signed statement that comes from the manufacturer, which certifies that the product is qualified for this tax credit. As with anything involving the IRS, be sure to save all receipts and the MCS, just in case the IRS requests them.

When you file your taxes, be sure to include a Form 5695. On the latest draft version of the form, the energy tax credit appears on line 52.

If you think this may be a good way to go to help offset the costs of home improvements for energy efficiency with your own home, visit the Energy Star website for more information. Check back often here, because the managers on the website seem to be keeping information current and answering people’s questions. You can find it at:

http://www.energystar.gov/index.cfm?c=tax_credits.tx_index

You might also want to read the IRS rules carefully and check with your tax advisor/accountant, if you have one.

Author: Jerry Dyess has been in the Texas Electricity business Texas Electric news for many years.

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