Tax credits
Update: Use 2009 Form 5695 to claim the Residential Energy Property credit and the Residential Energy-Efficient Property credit.
For information on energy-efficient products, visit the U.S. Department of Energy's Energystar Web site; not all Energy Star products qualify for the tax incentive.
The American Recovery and Reinvestment Act provides tax incentives for individuals to invest in energy-efficient products.
Residential Energy Property Credit (Section 1121): The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010.
The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
A similar credit was available for 2007, but was not available in 2008. Homeowners should be aware that the standards in the new law are higher than the standards for the credit that was available in 2007 for products that qualify as "energy efficient" for purposes of this tax credit.
For property purchased before June 1, 2009, homeowners generally can rely on the manufacturers' certifications and Energy Star labels that were available at the time for those products. Manufacturers have been advised that they should not continue to provide certifications for property that fails to meet the new standards. The IRS has issued Notice 2009-53 that will allow manufacturers to certify that their products meet the new standards. Please note, not all ENERGY STAR qualified products qualify for a tax credit. For detailed information about qualifying improvements, visit the U.S. Department of Energy's EnergyStar Web site and the EnergyStar Frequently Asked Questions site.
Residential Energy Efficient Property Credit (Section 1122): This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.