Last Chance for Energy Tax Credits: Make improvements now for winter comfort and tax-time savings
Time tends to fly when you're planning just about any home improvement, but a very real deadline is approaching for projects that can actually put money in your pocket as they increase the value and efficiency of your home.
With the Energy Policy Act of 2005 (EPACT), the Federal Government has granted consumers the very attractive opportunity to qualifying for a one-time income tax credit of up to $500 by installing efficient insulation, windows, doors, roofs and heating and cooling equipment in their current residences. The offer ends as of December 31 of this year, however, so now's the time to make improvements that'll provide both tax savings in the spring and comfort in the chilly months to come.
Even if you made some of the specified energy-wise upgrades during 2006 and claimed them on that year's return, you can earn remaining credit dollars up to your total $500 allotment via improvements done during 2007. Read on for details on projects that qualify and how to be rewarded by Uncle Sam for energy savings.
What improvements qualify
There are several smart upgrades you can make that'll easily add up to that $500 tax credit allowance, all of which must be made at your primary U.S. residence (condo and co-op improvements are apportioned to the owners; also, credit cannot be taken against the Alternative Minimum Tax).
Insulation products, including sealing measures such as weatherstripping, caulking and foam sealants, are eligible for a credit of 10 percent of product cost (not including installation), up to $500.
- Exterior windows, storm windows and skylights:
Energy Star-labeled exterior windows and skylights are the smartest, surest purchase to qualify for a 10 percent credit, exclusive of installation costs, of up to $200. Storm windows are eligible for the same amount, and must be accompanied by the Manufacturer's Certification Statement (a signed statement certifying that the product or component qualifies for the tax credit).
- Solar control window films:
Qualifying films installed to increase the efficiency of existing windows are eligible for tax credit equal to 10 percent of the materials costs, up to $500, and must be accompanied by a Manufacturer's Certification Statement. Click over to the International Window Film Association for more information.
- Exterior doors and storm doors:
Both varieties of doors qualify you for a credit of 10 percent of their cost, up to $500 (again, installation costs don't apply). Energy Star exterior doors will usually qualify, except for certain parts of California, and storm doors must meet specs through their installation in combination with a wood door assigned a default U-factor by the International Energy Conservation Code (IECC), and can't exceed the default U-factor requirement assigned to such a combination. All doors should be accompanied by a Manufacturer's Certification Statement.
- Metal roofing:
Look for roofing products with pigmented coatings that meet Energy Star requirements and are expected to last five years or are accompanied by a two-year warranty, and you'll earn 10 percent of the materials cost in credit up to $500.
- Central air conditioner, heat pump, or water heater:
With qualifying systems, you can earn up to $300 towards the full purchase price, including installation. For energy-saving hot water heating solutions spanning standard and tankless varieties, browse www.rheemtankless.com.
- Solar water heating:
Those who have truly gone green with their heating and cooling systems can now claim spending on their solar water heating system at 30 percent of cost for up to $2,000. All water for the system must be used in the home (swimming pools and hot tubs aren't included), at least half the home's energy must come from the sun, and the system must be certified by the Solar Rating and Certification Corporation (SRCC).
- Furnace or boiler:
These qualify for up to $150 towards the full purchase price of the unit, and/or $50 for an efficient air-circulating fan in the furnace, all including installation costs. What to do at tax time?
In addition to collecting any required Manufacturer's Certification Statements, receipts and records related to product purchases and installation (including Energy Star window labels), you'll need to file IRS Form 5695 with your taxes. Be sure to hold on to all documentation for future reference and proof of your purchases, and enjoy the year-round comfort and savings they provide!
Tom Kraeutler is the Home Improvement Editor for AOL and host of The Money Pit, a nationally syndicated home improvement radio program. To find a local radio station, download the show's podcast or sign-up for Tom's free weekly e-newsletter, visit the program's website.