Are you in the market to make energy-efficient improvements to your home – or perhaps make use of renewable energy sources, such as solar power? If so, it's important that you're aware of available federal tax credits and product rebates from your state and local governments and utility company that help offset the costs. While energy-efficient improvements can pay back the difference in cost over time, these incentives can help significantly as you look at the bottom line.
Energy Efficiency Tax Credits
Good news: Federal tax credits for energy-efficient products have been renewed to help energy-conscious homeowners and homebuyers save money and protect the environment. If you qualify, these credits, the Nonbusiness Energy Property Credit and the Residential Energy Efficiency Property Credit, are available for your 2016 purchases and retroactively for 2015 purchases.
With these tax credits, you have a win-win scenario: You reduce your taxes and save on your energy bills by installing certain home improvements. The amount of the credit varies, and as always, you should consult with a professional and/or tax advisor for expert advice.
Do your homework when considering financing energy improvements for your home. Shop around for an option that best suits your situation, making sure you understand the terms and risks of each option.
The following products currently qualify for tax credits:
- Biomass Stoves
- Air Source Heat Pumps
- Central Air Conditioning
- Gas, Propane, or Oil Hot Water Boiler
- Gas, Propane or Oil Furnaces and Fans
- Water Heaters (non-solar)
- Windows, Doors & Skylights
- Fuel Cells
- Geothermal Heat Pumps
- Small Wind Turbines
- Solar Energy Systems (tax credits for Solar Energy Systems are available through 2021)
Visit ENERGY STAR for the exact requirements on each of the products listed above.
To apply for the tax credit, you'll need to complete and file the IRS Tax Form 5695. Be sure to save all of your receipts and to keep the written certification from the manufacturer confirming that the product qualifies for the tax credit.
Making Sense of Incentives: With federal tax credits, you may receive a percentage of the amount of your purchase back in the form of a reduced federal income tax liability. With rebates, you typically receive quick cash back after your purchase.
Many state and local governments – along with utility providers – offer rebates for energy–efficient products. Some manufacturers also incentivize their "green" products through special offers that can make them more affordable for energy–conscious households.
Rebates are often available for many large appliances, including dishwashers, refrigerators, water heaters, windows, roofing, and heating and cooling systems. The best news about rebates? You typically get cash back quickly after your purchase – helping to defray your upfront costs almost immediately. Rebates are not typically dependent on tax credits so with good luck you can collect both.
To find rebates and other special incentives that may be available to you, visit ENERGY STAR and run a simple search using your zip code.
Follow this series to learn more about energy efficiency in your home and the importance of being green.
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