You expect energy-saving home upgrades to save you money on your energy bills and maybe even increase the value of your house, but what about saving you money on your taxes? Yes! Many upgrades are eligible for federal energy tax credits.
Your 2016 upgrades could earn you two federal tax credits. If you qualify for the credits, you’ll receive a percentage of the cost of your energy-efficient equipment purchase back via your federal income taxes. How? Your amount of tax due will be reduced, which can lead to substantial savings.
Here’s a quick breakdown of these tax breaks:
Residential Energy Efficient Property Credit
Renewable energy efficiency equipment can qualify for tax credits that cover 30% of the cost for:
Solar panels and solar-powered water heaters
Wind turbines that generate up to 100 kilowatts of electricity
Geothermal heat pumps
Fuel cells (with a maximum credit of $500 for each one-half kilowatt of capacity)
Nonbusiness Energy Property Credit
This credit involves two parts:
Qualified energy efficiency improvements specific to your building envelope can qualify for a tax credit for 10% of your home improvement costs for:
Insulation materials or systems to reduce heat loss or gain
Exterior doors, windows and skylights
Specified roofing materials
Residential energy property costs are the costs of new, installed equipment, which may qualify for a tax credit totaling 100% of the costs of:
Electric heat pumps and electric heat pump water heaters
Central air conditioning systems
Natural gas, propane or oil water heaters, furnaces and hot water boilers
Biomass stoves (those that burn plant-derived fuel like wood)
Advanced main circulating fans used in natural gas, propane or oil furnaces
A tax credit that reimburses you for 100% of your costs sounds great, right? Well, there are some limitations to the Nonbusiness Energy Property Credit so make sure to check all of the details.
If you own a plug-in electric vehicle, you could also receive $2,500 to $7,500 in energy tax credits.
Remember, the summaries above are just that. There are more details and requirements specific to each credit. Get all the energy tax credit information from the IRS. Of you need tax prep help or advice, reach out to a qualified tax professional.
Thinking about making energy improvements this year? Financing may be available to help fund this work. For more details visit the Residential Energy Efficiency Loan (REEL) Assistance Program.