In 2010, Congress promised significant tax credits for homeowners who make energy-efficient improvements to their homes. While these breaks are down a bit for 2011, there are still plenty of ways you can save by making sure your upgrades meet energy efficiency standards.
For 2011, the maximum tax break you can receive for energy efficient home improvements is $500, down from the $1,500 limit in 2009 and 2010. The law has also placed a limit on the amount you can claim for specific projects. .
Despite these cuts, it’s still important to know what’s still available to you. With the remaining credits it is still possible to find substantial savings on your tax bill.
Considering claiming energy efficiency tax credits? Here are some things you need to know
1. Be aware of the existing maximum credit.
The maximum credit of $500 applies throughout the life of the taxpayer. It is not an annual limit, nor is it applicable to the property itself. Therefore, for those who claimed $500 or more since 2006 (the year the credit was available), it is not possible to claim further tax exemptions for energy efficiency improvements.
2. The tax credit is restricted to primary residences.
The energy efficiency tax credit cannot be applied to any property other than your primary residence. This exclusion includes second homes and businesses.
3. Look for the Energy Star designation.
In general, home improvements such as windows, insulation, and heat pumps will qualify for the credit, as long as they have an Energy Star designation. Energy Star is a joint program of the US Environmental Protection Agency and the US Department of Energy All products with Energy Star designations must meet strict energy efficiency guidelines set by the US EPA and the US Department of Energy.
4. Not all Energy Star products qualify for the federal tax credit.
Many taxpayers assume they will be eligible for the federal tax credit because they purchased an Energy Star appliance. However, while these products can help lower your energy bill, they don’t always qualify for the energy efficiency tax credit. Ineligible appliances include refrigerators, washer-dryers, ovens, ceiling fans, light fixtures, and room air conditioners.
However, while such products may not be eligible for the federal tax credit, they may still qualify for a state rebate. In fact, last year, 36 states offered rebates to residents who purchased Energy Star products.
5. It is still possible to claim credit for improvements made in 2009 and 2010.
Energy efficiency improvements made in 2009 and 2010 may still qualify for the tax credit. If you didn’t claim the credit for the year the improvement was completed, it’s still worth it: Improvements made in those years are still eligible for a $1,500 lifetime maximum credit.