Tax credits for home improvements are an incentive to make your home more energy efficient. It is our responsibility as consumers to improve the quality of our environment. Energy-efficient products are one way for us to make a conscious decision to do our part. The perk is that credits are available for these home improvements.
What is a tax credit?
A tax credit is a direct reduction in tax liability (not dependent on the tax payer’s tax bracket). It is a “dollar for dollar” reduction on taxes owed.
What improvements qualify for a tax credit?
Credits available at 30% of the cost, up to $1,500 total. These credits only apply to existing homes, not new construction.
- Windows and Doors
- Water Heaters
- Biomass Stoves
Credits are available at 30% of cost, with no limit, through 2016. These credits apply for both existing homes and new construction.
- Geothermal Heat Pumps
- Solar Water Heaters
- Solar Panels
- Small Wind Energy Systems
Credits available at 30% of the cost, up to $500 per.5 kW of power capacity, through 2016. These credits apply for both existing homes and new construction, excluding vacation homes.
- Fuel Cells
How to know if you’re eligible for a tax credit?
A general rule of thumb is that if you don’t pay any taxes, you are not eligible for a credit. It is not dependent upon if you’re getting a refund or not. The total amount of income tax that you are responsible for paying is what determines your eligibility. You can not get more in credits than you are responsible for paying in federal taxes.
A more energy-efficient home means lower utility bills, improved air-quality, and more money in your pocket. This also improves the resale value of your home. All of these benefits plus the credit from the IRS makes becoming more energy-efficient more attractive than ever.