Many of us are trying to save money in just about any way we can right now. One of the best ways to do this is by making energy-efficient home improvements. Although these projects can take a big bite out of an already strained budget, they can pay off over the long run in the form of tax breaks and incentives: the Tax Payer Relief Act of 2012 includes several federal tax credits for energy-saving projects installed in 2012 and 2013 that can bring you big breaks on your federal taxes.
Key Facts
Qualifying projects include: insulation and weatherization, energy-efficient exterior doors, windows and roofing, air conditioners, heaters, water heaters and biomass stoves.
• All projects must be installed on the taxpayer’s principal residence in the United States.
The deduction includes both the cost of materials and installation.
• There is a cumulative tax credit total of $500 over tax years 2012 and 2013. In addition, if you took a tax credit for a qualifying project between 2006 and 2011, you must deduct this from the $500 total.
• Projects must reasonably be expected to last at least five years. This can usually be satisfied by a two-year warranty.
The Specifics
The following is a list of eligible projects, including individual project caps and requirements for qualification.
• Insulation, including caulking, weather stripping and foam sealants: 10% of the product and installation cost. Must meet criteria in the 2009 International Energy Conservation Code.
• Exterior windows including skylights and storm windows: 10% of the product and installation cost up to a maximum of $200. Must meet ENERGY STAR requirements.
• Exterior doors: 10% of the product and installation cost for doors. Must meet ENERGY STAR requirements.
• Metal roofing with pigmented coating, or asphalt roof with cooling granules: 10% of the product and installation cost. Must meet ENERGY STAR requirements.
• Advanced main air circulating fan: 10% of the product and installation cost up to $50. Must have an electricity use of no more than 2% of total energy used by the furnace.
• Natural gas, propane, or oil furnace or hot water boiler: 10% of the product and installation cost up to $150. Must have an annual fuel utilization efficiency (AFUE) rate not less than 95.
Electric heat pump water heater: 10% of the product and installation cost up to $300. Must have an energy factor of at least 2.0.
• Heat pump: 10% of the product and installation cost up to $300. Must have a SEER of at least 15, an EER of at least 12.5, and an HSPF of at least 8.5.
• Central air conditioner: 10% of the product and installation cost up to $300. Must have SEER of at least 16 and an EER of at least 13.
• Natural gas, propane, or oil water heater: 10% of the product and installation cost up to $300. Must have an energy factor of at least .82 or a thermal efficiency rating of at least 90%.
• Biomass stove: 10% of the product and installation cost up to $300. Must have a thermal efficiency rating of at least 75%, heats a dwelling or water for use in a dwelling and be fueled by plant-derived fuel.
Other Resources
There are some older federal tax credits that are still in effect through December 31, 2016. These include a one-time tax credit of 30% on the cost of qualifying geothermal heat pumps, solar water heaters, solar panels, small wind turbines, or fuel cells installed in an existing or new home.
For more information, visit: http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
Many states offer additional energy tax incentives to their residents. To find your state’s incentives visit: http://www.dsireusa.org/
Alex Wayne is a full-time home improvement, plumbing and HVAC blogger for MTB Mechanical in Charlotte, NC.