Go “Green” and Save Some Dough at Tax Time


There are a couple of nice tax breaks for homeowners in 2011 in the “green energy” department.

Homeowners who install energy efficient improvements such as insulation, new windows, and furnaces qualify for a modest Federal tax credit equal to 10 percent of the cost of the “qualified energy efficiency improvements”.  The credit can also be claimed for the cost of residential energy property, including labor costs for installation.  Such property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves which burn “biomass” fuels.  This “Nonbusiness Energy Property Credit” is capped at $500 for a taxpayer’s lifetime, of which only $200 may be used for windows.

But here’s another credit actually worth talking about:  the “Residential Energy Efficient Property Credit,” which equals 30 percent of whatever a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines and fuel cell property.  And no cap exists, except with respect to fuel cell property.

Folks need to check with their vendor/manufacturer for evidence certifying that the property qualifies.  IRS says that, “taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.”

Be sure to prepare IRS Form 5695 (“Residential Energy Credits”) when you file your 2011 return to document these credits.

Learn more about Finances & Taxes for Homeowners on Nolo.com.