Energy Tax Credit: Which Home Improvements Qualify?

• Qualifying improvements include windows, outer doors, water heaters and skylights that help save energy and meet specific energy standards.
• The credit for most improvements is worth as much as $500 for 2011.
• Homeowners who are really ambitious can get an even bigger tax credit if they install energy-generating improvements, such as solar panels, wind turbines and geothermal heat pumps between 2009 and 2016.

You can get a one-time federal tax credit up to $500 when you install energy-saving windows, doors, insulation, roofing material, non-solar water heaters, or heating, ventilating, and air conditioning systems in your home.

To qualify, these items must be "placed in service" (that's fancy talk for installed and ready to use) through December 31, 2011 and include a Manufacturer Certification Statement, which is a signed statement from the manufacturer that the item qualifies for the tax credit.

The tax credit must be taken in the tax year that the item was placed in service. In other words, if you made an improvement in 2010, you can’t take a credit for it in 2011. The maximum tax credit for 2011 is $500 and the $500 maximum applies to all items combined. Since the credit is 10% of what you spend, you'll need to spend $5,000 to "max out" the credit.

Click a link for the item's qualification details, or visit Federal Tax Credits for Energy Efficiency.

Before you decide to make an improvement make sure that the items you plan to purchase actually qualify for the tax credit.

We'll give you basic information below with helpful links. For complete qualification details please visit Federal Tax Credits for Energy Efficiency.

The tax credit is 10% of the cost of qualifying materials, up to a maximum of $500. Labor and installation costs do not qualify. 

• Both the U-factor and Solar Heat Gain Coefficient (SHGC) must be less than or equal to 0.30 (regardless of any ENERGY STAR label) if installed on or after June 1, 2009.
• For additional information see Rebates and Tax Credits for Windows, Doors, and Skylights.
   

The tax credit is 10% of the cost of qualifying materials, up to a maximum of $500. Labor and installation costs do not qualify.

• Both the U-factor and SHGC must be less than or equal to 0.30 when combined with the exterior window or wood door over which the item is installed.
• The item must meet criteria established by the International Energy Conservation Code (IECC).Your retailer should be able to provide you with the Manufacturer Certification Statement. If not, check the manufacturer's website.

This only covers insulation, not insulated items such as siding or window shades.

• The insulation material must meet 2009 IECC criteria.
• Your retailer should be able to provide you with the Manufacturer Certification Statement, or you can check the manufacturer's website. 

The tax credit is 10% of the cost of qualifying materials, up to a maximum of $500 credit. Labor and installation costs do not qualify.

• Metal roofs and reflective asphalt shingles that meet ENERGY STAR requirements are eligible. 
• Roof coatings are not eligible.

The tax credit is 10% of the cost, including labor and installation, up to a maximum of $500.

• Requirements vary, depending upon which type of system you're installing. There is too much information to present here.
• Visit the official government site for qualification criteria and FAQs.

The tax credit is 10% of the cost, including labor and installation, up to a maximum of $500.

• Gas, oil, and propane water heaters must either have at a 0.82 (or greater) Energy Factor OR a 90% (or higher) thermal efficiency.
• Currently, only tankless gas, oil, and propane water heaters qualify.
• Electric water heaters, tankless or otherwise, do not qualify; however, electric heat pump water heaters qualify if they have a 2.0 or greater Energy Factor.

Solar water heaters are discussed below.

If you're really ambitious, you can get a one-time federal tax credit of 30% of the cost of qualifying geothermal heat pumps, solar water heaters, solar panels, small wind turbines, or fuel cells placed in service for an existing or new construction home through December 31, 2016.

Except for fuel cells (which must be installed in your primary residence to qualify), the credit can be used for items installed in vacation or second homes as well.

Here's the best part – the 30% credit applies to the cost, including labor and installation, and there is no maximum limit (except for fuel cells). For example, if you purchase and install a small wind turbine for $10,000, you get a $3,000 tax credit right off the bat – not counting the future savings on your electric bill.

This tax credit must be taken in the tax year that the item was placed in service, and a Manufacturer Certification Statement must accompany the item to qualify. For complete details, visit Federal Tax Credits for Energy Efficiency.

Updated for tax year 2009