Save Green: How to Get Tax Credits for Making Eco-Friendly Home Improvements

You are entitled to a tax credit of up to $1,500 for making green improvements to your home by December 2010.


| July/August 2009



Save Green 3

You can take 30 percent of the entire cost of installing residential wind turbines and solar panels off your tax bill.

Photo courtesy Southwest Windpower

The 2009 stimulus package, signed into law last spring, extends generous federal tax credits for a number of home improvements: alternative energy systems; efficient hot water and heating and air conditioning systems; energy-efficient windows and doors; insulation; and reflective roofing. Installing any of these items by December 31, 2010, entitles you to a tax credit of up to $1,500. Geothermal heat pumps, photovoltaic electric and water-heating systems, and wind-power installations qualify for a 30 percent tax credit with no dollar limit. Fuel cells, which convert hydrogen into electricity without combustion, get a 30 percent discount, too, with limits based on the amount of electricity produced. The new law covers these products through 2016.

Tax credits—not to be confused with tax deductions that lower your taxable income—come right off your federal income tax liability as long as the products are installed during the time period required. In short, a $1,500 tax credit puts $1,500 in your pocket!

Here’s how the tax credits work. Let’s say you would owe $10,000 in federal income taxes for 2009. But in August, you replace old drafty doors with new, energy-efficient ones that cost $5,000. You can then take 30 percent of $5,000, or $1,500, off your taxes when you file your income tax return for 2009. Instead of paying $10,000 in income taxes that year, you will pay $8,500. The paperwork is simple. Save receipts and fill out IRS Form 5695. The $1,500 limit is cumulative—you cannot install a new roof and new windows and get $3,000 off your taxes for a single year.

Homebuilders are also eligible for tax credits of up to $2,000 for constructing highly energy-efficient homes, and manufacturers of modular and other types of “system-built” homes qualify for a $1,000 tax credit when they substantially reduce energy requirements. 

Get money back now!

You can get a 30 percent tax credit of up to $1,500 or more for making these fixes.

12/31/2013 11:57:09 AM

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