For most Americans, the holiday season means shopping for family and friends. But this year, spending a little money at home can equal big savings today, next year and for years to come. With time running out to cash in on the popular home energy efficiency tax credit—which expires Dec. 31, 2010—homeowners need to act now to save up to $1,500 on their 2010 tax return.
The federal “Non-Business Energy Property Tax Credit” gives homeowners the opportunity to earn a tax credit equal to 30% of what they spend on qualifying home energy efficiency product purchases, such as insulation, weatherization products and high-efficiency heating and air conditioning units. Homeowners can claim the credit, which is capped at $1,500, when they file their 2010 federal income tax return.
“In addition to making a home more comfortable, energy efficiency upgrades give homeowners a triple return on their investment,” said Mike Lawrence, vice president and general manager of Insulation Systems for Johns Manville, a manufacturer of building products. “One, a return on their 2010 income taxes; two, monthly savings in the form of lower heating and cooling bills; and three, a return when it comes time to sell their home, since data show that energy efficient homes have a higher resale value.”
What is the Home Energy Efficiency Tax Credit?
Established as part of the American Reinvestment and Recovery Act, homeowners who purchase eligible energy efficiency products or a renewable energy system for their primary residence will receive a federal tax credit for 30% of the cost, up to $1,500. The credit applies to all qualifying material costs (including insulation), and in some cases also counts toward installation costs. The maximum credit of $1,500 is for a two-year period, which means that if you claimed a portion of the credit on your 2009 taxes, you are eligible only for the remaining balance in 2010.
What kinds of products and projects qualify for the tax credit?
Many products qualify for the tax credit, but building products manufacturer Johns Manville recommends investing in simple energy efficiency projects, such as insulating and air sealing, before spending money on more costly upgrades, such as solar, wind and geothermal energy systems.
“Energy efficiency projects truly are the most logical ‘first step’ for a majority of homeowners,” said Lawrence. “In many cases, simple projects can yield significant results. For example, U.S. EPA data show that homeowners can save up to 20 percent on their heating and cooling bill by having a properly insulated and air sealed home.”
Attics are often the largest source of potential heat loss in a home, and even homes built recently are likely to be among the 46 million under-insulated homes in the U.S., according to Harvard University. Homeowners simply need to measure the amount of insulation in their attic with a ruler to see if they have an adequate depth. The average U.S. home may need up to 19 inches of fiber glass attic insulation for maximum energy efficiency.
“In addition to adding insulation, homeowners should also air seal their attic. After all, even the best-insulated attics will fall short of their money-saving potential if attic cracks and gaps allow a home’s conditioned air to escape,” added Lawrence. “And as homeowners seal and insulate their homes for better energy efficiency, they should consider using products that don’t contain formaldehyde, such as John Manville’s Formaldehyde-free insulation. Avoiding formaldehyde sources helps improve indoor air quality.”
I’ve purchased and installed my product. Now what?
To take advantage of the credit, homeowners will need to file an IRS Form 5695 and submit it as part of their 2010 taxes. The form must be accompanied by a store receipt—credit card statements won’t work—and homeowners need to obtain and keep on record a “manufacturer’s certification statement” for each item. These statements are typically found on the product manufacturer’s website, and the IRS cautions that the manufacturer’s certification statement is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the credit.
What happens if I miss the deadline for the tax credit?
While $1,500 is a significant incentive, homeowners shouldn’t shy away from an energy efficiency project if they miss the tax credit deadline. Energy efficiency is a long-term investment that will save homeowners money for the life of their home, and what’s more, many state and local incentives still apply after Dec. 31. Homeowners should check with their utility company to investigate local rebate opportunities, and also look into additional incentives available through their state’s energy office.
(Information published by RISMEDIA, December 6, 2010)
