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Energy Tax Credits Are Back!

Kelly Ann Butterbaugh
Category Tax Tips

The energy tax credits are back! Earned credits for Energy Star home improvements expired last year, but they have been reenergized for 2009 and 2010. Now, home improvements that create more efficient energy use can rack up nicely sized deductibles on next year's taxes. Not only that, but the energy savings credits have been improved as well as extended.

What Is It?

Known as the American Recovery and Reinvestment Act of 2009, this tax credit program rewards those who make improvements that create better energy efficiency for their homes. The act was signed into effect by President Obama on February 17, 2009.

What's the Maximum?

The maximum credit previously locked at a per item rate has been streamlined to reach a maximum tax credit of $1500 for two years (you may receive $400 credit on the 2009 taxes and $900 in 2010, for example, or all $1500 in one year, but not both.)


The total credit per item can be calculated much easier by accounting for a 30% tax refund rather than checking the former program's allotted amount for each improvement. There are no caps for set items under the new act. This makes for a much easier calculation now that each item carries the same weight.

Window replacements that qualify for the energy efficiency rating are no longer capped at $200 each year. Instead, the only cap is the total at the end of the two years, allowing you to earn all $1500 on windows where in the past that would not have been allowed.

What Counts?

Qualifying items include Energy Star rated: water heaters, HVAC systems, metal or asphalt roofs, insulation installation, replacement windows, entry doors, and biomass stoves.

Some improvements, markedly major ones, don't count towards the $1500 maximum refund and have been guaranteed as credits through 2016. For long term planners who want major renovations to their homes' energy sources, geothermal, solar, and wind energy systems can exceed the $1500 allowance. However, they're not an improvement made on a whim, either.

These refunds are available only for improvements made on existing homes. New homes qualify for different credits.

It's not a bad idea to spread out your improvements. Knowing that the cap is $1500 and the tax credit can be earned in both 2009 and 2010, replacing the water heater this year and the furnace the next is a nice way to spread out your budget and guarantee the same tax refund in the end. Check this site for complete program regulations and answers to your questions.


You may earn energy tax credits by replacing your windows


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