Energy Star Tax Credits: Which Home Improvement Projects Qualify?


energy star tax creditsTaxpayers who upgrade their homes to improve energy efficiency may be eligible for tax credits to offset the costs for those upgrades. Here is a basic guide of which home improvement projects qualify for the energy star tax credits.

Equipment upgrades

  • Solar panels, or photovoltaics, for generating electricity. The electricity must be used in the home.
  • Solar-powered water heaters. The water heated by the system must be used inside the home, and at least half of the home’s water-heating capacity must be solar. (Solar heaters for swimming pools and hot tubs do not qualify.)
  • Wind turbines that generate up to 100 kilowatts of electricity for residential use.
  • Geothermal heat pumps that meet federal Energy Star guidelines.
  • Fuel cells that rely on a renewable resource (usually hydrogen) to generate power for a home. The equipment must generate at least 0.5 kilowatts of power.

Qualified energy efficient improvements

  • Home insulation
  • Exterior doors
  • Home windows
  • Certain roofing materials

Residential energy property costs

  • Electric heat pumps
  • Electric heat pump water heaters
  • Central air conditioning systems
  • Natural gas, propane or oil water heaters
  • Stoves that use biomass fuel
  • Natural gas, propane or oil furnaces
  • Natural gas, propane or oil hot water boilers
  • Advanced circulating fans for natural gas, propane or oil furnaces

You can claim Energy Star tax credits for 10% of the cost of qualified energy efficiency improvements and 100% of residential energy property costs. With that being said, there are some limitations. Those include:

  • This credit is worth a maximum of $500 for all years combined, from 2006 to the present.
  • Of that combined $500 limit, a maximum of $200 can be for replacement windows.
  • The maximum tax credit for a furnace circulating fan is $50.
  • The maximum credit for a furnace or boiler is $150.
  • The maximum credit for any other single residential energy property cost is $300.

Replacing different features of your home can be costly at first, but it really pays off in the long run. This is especially true for new windows. When you replace your old windows with new ones, your energy bills will likely decrease a lot, saving you money every month. Then, you get to claim Energy Star tax credits on your income tax return for replacing your windows, giving you a higher return. Finally, homeowners can see up to 80% of their investment back when they replace their windows, according to the National Association of Realtors. So, you really win in many different areas just from replacing your old windows.