Tax Credits for Home Improvement

There were some changes made to the tax law regarding energy efficient improvements to your home, as a part of the ARRA of 2009.  This credit is known as the Nonbusiness Energy Property Credit, and it increased some of the tax credits you could receive for making energy efficient home improvements.  The credit is available for improvements made during the calendar years 2009 and 2010 – after that the credit will revert to the old rules (unless another change is made to the law).

Here are seven things that the IRS wants you to know about the Nonbusiness Energy Property Credit, as written about in the IRS Summertime Tax Tip 2010-16:

1. The new law increases the credit rate to 30% of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010.
2. The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
3. To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
4. Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturer’s website.
5. Qualifying improvement must be placed into service after December 31, 2008 and before January 1, 2011.
6. The improvements must be made to the taxpayer’s principal residence located in the United States.
7. To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return.  Taxpayers must claim the credit on the tax return for the year that the improvements were made.

Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.

Photo by Adventures of Pam & Frank