If you've been transforming your house or condo into a green-friendly haven by installing energy-efficient appliances, you may qualify for credits on this year's taxes. Tax credits reduce the amount of income tax you owe dollar-for-dollar, so they can offer serious tax savings. It's important to know which energy-saving appliances qualify, how the credit is calculated and what paperwork you need in order to receive the refund.
If you own a home, you can claim up to a $1,500 credit on your income taxes for installing qualified energy-efficient appliances. Central air conditioners, furnaces, boilers, water heaters and biomass stoves are eligible. The credit will be directly subtracted from your total income tax owed, thus reducing your tax payments. Energy efficient appliances will also save you money in the long run on energy bills.
The amount of credit you receive depends on how much you spent on energy-efficient appliances. The tax credit is 30 percent of the total cost of the energy-efficient appliance, including any installation costs. In other words, in order to get the full $1,500 credit, you would need to spend $5,000 on energy-efficient appliances in 2009 and 2010. If you get the full $1,500 credit in 2009, you cannot receive additional credit in 2010. Solar water heaters and geothermal heat pumps are eligible for a 30 percent credit with no maximum limit.
You can apply for the tax credit if you have installed your energy-efficient appliances in 2009 and before December 31, 2010. Unfortunately, only the appliances listed above are eligible and you cannot receive a tax credit for energy-efficient dishwashers, dryers or other common appliances. To qualify, appliances must be installed in a residence that you own; renters do not qualify for the credit. There are differing criteria depending on the appliance. The best way to know if a specific energy-efficient appliance qualifies for the credit is to request a manufacturer’s certification statement. This signed statement certifies that your appliance meets the qualifying criteria. They can often be found on manufacturers’ websites or by contacting the manufacturer.
How to Apply
When you file your income taxes, you should also file IRS form 5695. Take any receipts showing how much you spent on the appliances with you to your accountant or have them handy if you do your own taxes. You won’t be required to submit the manufacturer’s certifications or receipts when you file your return, but it’s important to keep them with your records in case the IRS inquires about the appliances.
Megan Martin has more than 10 years of experience writing for trade publications and corporate newsletters as well as literary journals. She holds a Bachelor of Arts from the University of Iowa and a Master of Fine Arts in writing from The School of the Art Institute of Chicago.