This tax credit has undergone a change from previous years. In 2010, for example, you could achieve a credit for as much as 30% of the cost of your energy-saving home improvements, with a ceiling of $1,500.
Beginning January 1, 2011, the credit rate is now just 10%, and the ceiling has been lowered to $500. Something important to keep in mind about this credit: any credit claimed in prior years (2009 and/or 2010) will be used to reduce your ceiling. In other words, if you claimed the full credit (or any amount up to $500) on a previous year’s tax return, you have no energy-saving home improvement credit available to you.
In addition to the changes above, there are specific item caps in place as well. For example, if you are putting in a new furnace or water heater, the credit for those units is capped at $150. If you’re putting in a biomass fuel stove (those are the corn-fueled or pellet-fueled furnaces), then you can claim up to a $300 credit against the purchase price. And if you’re putting in new energy-efficient windows, the cap is $200.
One area that the credit remains at 30% is with alternative energy systems, such as wind-power or solar panels, so if you’re really into the alternative energy option this could be helpful.
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Sterling Raskie, MSFS, CFP®, ChFC®
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