tax-credits-rebates-homeowners-guide
Home Energy Savings | January 27, 2017

The Homeowners’ Guide to Tax Credits and Rebates

We put together a big list of home improvement tax credits to help you save money on your 2016 tax return. We also included information on rebates for energy-efficient appliances to help you save money if you need/want to use your tax savings on energy-efficient appliances.

What’s a home improvement tax credit?

To help provide incentives for homeowners to make energy-efficiency home improvements, the federal government offers tax credits as a way to offset the costs of these repairs/changes. This is not cash in your hand (like a rebate which gives you cash back after you’ve made a purchase), but rather a deduction you can make on your annual tax return that can, depending on your other deductions, reduce the federal taxes you pay as a homeowner.

Please Note: Tax credits for home improvements might change. In other words, a tax credit that exists today for, say, replacing your attic insulation, might not exist next year or, if it does exist, might not be for the same dollar amount. Check Energy.gov to see what tax credits can be claimed in your state: http://energy.gov/savings.

It is recommended that you consult your tax advisor about your individual tax situation. This guide is meant to provide general information only.

What Types of Tax Credits Are You Looking For?

Click an icon for more information on tax credits:

Rebates
Solar Energy
Roofs
Doors, Windows, and Skylights
Insulation
Biomass Stoves
Central Air Conditioning
Water Heaters
Residential Wind Turbine
Geothermal Heat Pump

 

Home Improvement Tax Credits for Roofs:

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Is there a tax credit for roofs? Yes! If you are replacing or adding a new roof to your home, you could qualify for an energy-efficient home improvement tax credit for as much as 10 percent of the cost (not counting installation costs). Here’s how to add your roof tax deduction to your tax return and the requirements to receive a roof tax credit.

Am I eligible for a roof tax deduction?

  • This must be for your primary residence (you live here full-time).
  • This must not for be a new home or a rental.
  • The roofs that are eligible are reflective roofs.
  • Roof coatings are not eligible.
  • More eligibility requirements can be found here.

How do I apply for a roof tax credit?

  1. Make sure you’ve saved a copy of the roof Manufacturer’s Certification for your records, but you do not need to file this with your tax return. More details here.
  2. When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a new roof on my tax return?

You can deduct up to 10 percent of the cost (not including installation costs), up to $500.

Other common questions about roof tax credits:

  • Is a roof replacement tax deductible? Yes, see above for details on how to claim this tax credit.
  • Is a new roof a tax deduction? Not for a brand new home, but a replacement roof or roof repairs would qualify on your primary residence. Search for ENERGY STAR-certified roof products here.
  • Are roof repairs tax deductible? Usually not. The federal government typically considers repairs as current expenses, i.e those necessary to maintain a property. Replacing a roof, in contrast, is considered a capital improvement and therefore is tax deductible.
  • Is a metal roof tax deductible? Yes, in certain circumstances. The product must be ENERGY STAR certified. You can learn more here. Tax credit is generally for up to 10 percent of cost (not counting installation, and with a $500 lifetime limit).
  • Is an asphalt roof tax deductible? Yes. The tax credit is for up to 10 percent of cost (not counting installation) with a lifetime limit of $500. Find out more here.
  • Are roof coatings tax deductible? No.
  • Are new roof shingles tax deductible? If you are replacing your roof, the cost of materials is tax deductible to the amount allowed by law. (See above.) If you are simply replacing or repairing certain shingles, that is not tax-deductible.

Discover more home improvement tax credits and energy efficient appliance rebates:

 

Home Improvement Tax Credits for Solar Energy Systems:

tax-credits-solar-energy-systems
Solar panels collect light energy from the sun and convert it into electricity for your home and solar hot water heaters use the sun to provide hot water to your home. Here’s what you need to know to find out if you can qualify for home energy improvement tax credits for installing solar panels or solar hot water heaters. Find out more about how solar energy works on our blog.

Am I eligible for a solar panel installation tax deduction?

  • This must be for your primary residence (you live here full-time).
  • This must not be for a new home or a rental.
  • The panels must provide electricity for your home.
  • They must meet required fire and electrical codes.
  • More eligibility requirements can be found here.

How do I apply for a solar panel tax credit?

  1. Make sure you’ve saved a copy of the roof Manufacturer’s Certification for your records, but you do not need to file this with your tax return. More details here.
  2. When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a new solar panels on my tax return?

You can deduct up to 10 percent of the cost (not including installation costs), up to $500.

Other common questions about solar panel tax credits:

Is there an ENERGY STAR label yet for solar panels?

No, solar energy products are not currently eligible to earn the ENERGY STAR label, because they do not yet meet the criteria in the ENERGY STAR guiding principles. As solar panels increase in popularity that could change.

Am I eligible for a solar hot water heater tax deduction?

  • The heater must be installed in your primary residence (you live here full-time).
  • Existing and new homes qualify; rentals do not.
  • At least half the energy generated by the solar hot water heater must come from the sun.

How do I apply for a solar hot water heater tax credit?

How much can I claim on my tax return for a new solar hot water heater?

You could be eligible for an energy-efficient home improvement tax credit on as much as 30 percent of the cost, including installation, with no upper limit.

Other common questions about solar hot water heater tax credits:

  • Is a solar water heater installed for a swimming pool or hot tub eligible for a tax credit? No.
  • Do solar hot water repairs qualify for tax credits? No. They are considered maintenance expenses rather than home improvement expenses and therefore are not eligible.

Discover more home improvement tax credits and energy efficient appliance rebates:

 

Home Improvement Tax Credits for Windows, Doors and Skylights:

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Replacing old windows, doors and skylights is one way to save on energy costs. Energy-efficient windows, doors and skylights can prevent heat loss in cooler weather and help maintain the cool temperature you want during the warmer months.

Am I eligible for a windows, doors and/or skylights tax deduction?

  • This must be for your primary residence (you live here full-time).
  • This must not be for a new home or a rental.
  • The replacement windows, doors or skylights must be ENERGY STAR-certified products.
  • More eligibility requirements can be found here.

How do I apply for a windows, doors and/or skylights tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a new windows, doors and/or skylights on my tax return?

  • You could be eligible for an energy-efficient home improvement tax credit of up to 10 percent of the cost (not including installation).
  • There is a $200 cap on windows and skylights and a $500 cap on doors.
  • The cumulative maximum tax credits for windows, doors, and skylights for all years combined is $500.

Other common questions about windows, doors and/or skylights tax credits:

  • Do I have to replace all the windows, doors or skylights to qualify for the tax credit? No. You can do this work piecemeal and still qualify as long as they are ENERGY STAR certified.
  • Do only replacements count for a tax credit? No. Installing a new window where there wasn’t one previously (such as in an addition) also can qualify for the home energy improvement tax credit.

Discover more home improvement tax credits and energy efficient appliance rebates:

 

Home Improvement Tax Credits for Insulation:

tax-credit-insulation
If you want to learn more about insulating your home, check out our Home Energy Savings series on attic insulation. Products that reduce air leaks can also qualify if they follow certain criteria.

Am I eligible for an insulation tax deduction?

  • This must be your primary residence (you live here full-time).
  • This must not be a new home or a rental.
  • Bulk insulation products such as batts, spray foam insulation and rolls are typically covered.
  • The credit can apply to replacing or improving insulation but its primary purpose must be to insulate.
  • You must have a copy of the Manufacturer’s Certification Statement to qualify.
  • More eligibility requirements can be found here.

How do I apply for an insulation tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for an insulation my tax return?

10 percent of the cost (not including installation), up to $500

Other common questions about insulation tax credits:

Do air sealing products also qualify for a tax credit?

Products that reduce air leaks can also qualify, as long as they come with a Manufacturer’s Certification Statement. These include:

  • Weather stripping
  • Spray foam in a can, designed to air seal
  • Caulk designed to air seal
  • House wrap

Can I install the insulation or air sealing products myself and get the insulation tax credit?

Yes, you can install the products yourself and still qualify for the credit.

Discover more home improvement tax credits and energy efficient appliance rebates:

Home Improvement Tax Credits for Biomass Stoves:

tax-credits-biomass-stoves

Biomass stoves burn plant-derived fuel, such as wood and wood waste like wood pellets as well as grasses.

Am I eligible for an biomass stove tax deduction?

  • This must be used for your primary residence (you live here full-time).
  • It cannot be used for a new home or a rental.
  • The stoves must be used for heat or water heating and have a thermal efficiency rating of at least 75 percent as measured using a lower heating value.
  • You must have a copy of the Manufacturer’s Certification Statement to qualify.
  • More eligibility requirements can be found here.

How do I apply for a biomass stove tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a biomass stove my tax return?

You can receive a $300 energy efficient home improvement tax credit for purchasing a biomass stove.

Other common questions about biomass stove tax credits:

  • What should a retailer provide me when I buy a biomass stove to get the tax credit? Retailers should give you the Manufacturer’s Certification Statement for the model you purchase. This statement is signed and from the manufacturer certifying that the stove qualifies for the tax credit. Manufacturers often have these on their websites if you did not get one when you bought the stove. Be sure it matches your model number.
  • What does the IRS consider to be biomass fuel? The IRS defines biomass fuel as “any plant-derived fuel available on a renewable or recurring basis.”

Discover more home improvement tax credits and energy efficient appliance rebates:

Home Improvement Tax Credits for Central Air Conditioners:

tax-credits-central-ac
Replacing antiquated central or air conditioners or adding central air conditioners could qualify you for a federal tax credit. Find out more here.

Am I eligible for a central air conditioner tax deduction?

  • This must be used for your primary residence (you live here full-time).
  • It cannot be used for a new home or a rental.
  • The air conditioner does not have to be replacing an old air conditioner to qualify.
  • The air conditioner must be ENERGY STAR certified to qualify for the home energy improvement tax credit.
  • More eligibility requirements can be found here.

 How do I apply for a central air conditioner tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a central air conditioner on my tax return?

You can be eligible for a $300 home improvement tax credit if you replace or install central air conditioning.

Other common questions about central air conditioner tax credits:

  • Do I have to replace both heating and central air to qualify? No, you do not have to replace both your heating and air conditioning in theory. Practically speaking, however, you may have to replace both for the air conditioner to qualify. Most central air conditioners will only qualify for the tax credit if you also replace the air moving device that pushes the cool air through the duct system, and this is typically part of the heating system, too.
  • Is there a tax credit for window air conditioning units? No, only central air conditioners are eligible.

Discover more home improvement tax credits and energy efficient appliance rebates:

 

Home Improvement Tax Credits for Non-Solar Water Heaters:

tax-credits-water-heaters

Unlike their solar counterparts, non-solar water heaters operate on gas, propane or electricity. Here’s what you need to know to see if your water heater qualifies for a federal tax credit.

Am I eligible for a non-solar water heater tax deduction?

  • This must be used for your primary residence (you live here full-time).
  • It cannot be used for a new home or a rental.
  • The amount of tax credit depends on the model and type of fuel being used. (See below.)
  • More eligibility requirements can be found here.

How do I apply for a non-solar water heater tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a non-solar water heater on my tax return?

  • You may be eligible for a $300 home improvement tax credit if you replace your non-solar water heater with a more energy-efficient model. That amount of the potential tax credit depends on the type of water heater.
  • Electric heat pump water heaters qualify for the home improvement tax credit only if they have an energy factor of at least 2.
  • Gas, oil or propane hot water heaters must have an energy factor of at least .82 or thermal efficiency of at least 90 percent.

Other common questions about non-solar water heater tax credits:

  • Does it matter what fuel my water heater uses to get the tax credit? Water heaters that run on gas, propane or electricity are all potentially eligible as long as they meet other tax credit requirements.

Discover more home improvement tax credits and energy efficient appliance rebates:

Home Improvement Tax Credits for Geothermal Heat Pumps:

tax-credits-geothermal-heat-pumps

Geothermal heat pumps are similar to ordinary heat pumps, except for this one major difference: they use the ground instead of outside air to provide heating, air conditioning and, in most cases, hot water. They use the Earth’s natural heat, making them among the most efficient and comfortable heating and cooling technologies currently available.

Am I eligible for a geothermal heat pump tax deduction?

  • This must be used for your primary residence (you live here full-time).
  • It can be used for a new home.
  • Second homes and existing homes are eligible.
  • All ENERGY STAR-qualified geothermal heat pumps are eligible for the tax credit.
  • More eligibility requirements can be found here.

How do I apply for a geothermal heat pump tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a geothermal heat pump on my tax return?

Installing a geothermal heat pump in your home could entitle you to a federal tax credit of up to 30 percent of the cost, including installation, with no upper limit.

Other common questions about geothermal heat pump tax credits:

  • Does a geothermal heat pump have to include water heating to qualify for the federal tax credit? No, it does not. That requirement was eliminated in December 2009.
  • Is there a tax credit for water-to-water geothermal heat pumps? Yes, water-to-water geothermal heat pumps can qualify for the tax credit. The geothermal heat pump tax credit is for 30 percent of the cost of the product (plus installation costs) with no upper limit.

Discover more home improvement tax credits and energy efficient appliance rebates:

Home Improvement Tax Credits for Small Residential Wind Turbines:

tax-credits-small-wind-turbine

Wind turbines essentially collect kinetic energy from the wind and then convert it into electricity.

Am I eligible for a small wind turbines tax deduction?

  • This must be used for your primary residence (you live here full-time).
  • It can be used for a new home.
  • Second homes and existing homes are eligible; rentals are not.
  • To be eligible for the credit, the turbine must have a nameplate capacity of no more than 100 kilowatts
  • More eligibility requirements can be found here.

How do I apply for a small wind turbines tax credit?

When you submit your 2016 tax return, file Form 5695 (Residential Energy Credits) here.

How much can I claim for a small wind turbines on my tax return?

You can qualify for 30 percent of the cost (including installation).

Other common questions about small wind turbines tax credits:

  • Can the small wind turbine energy tax credit be carried over to future years? Tax credits for only five products are currently allowed to be carried forward. The others that are eligible, besides small wind turbines, are solar panels, solar water heaters, geothermal heat pumps, and fuel cells. The IRS has not stated, however, how long these credits can be carried forward.

Discover more home improvement tax credits and energy efficient appliance rebates:

What are rebates for energy efficient appliances?

ebates-energy-efficient-appliances

Like federal tax credits, rebates are incentives for consumers — this time from manufacturers and/or power companies rather than the federal government — to help give them incentives to upgrade antiquated and likely less energy efficient appliances with newer models that operate more efficiently. Unlike tax credits, rebates are actual cash — eventually. Yes, some paperwork is required. You generally need to show proof of purchase and model numbers (depending on the type of rebate), but then if all matches up, a check will be mailed to your home from either the participating manufacturer or energy company. Fairly simple, right? And likely worth the effort.

What types of appliances qualify for rebates?

While the list changes regularly as manufacturers and power companies offer different options, generally the following appliances qualify for rebates on a fairly regular basis:

Appliance rebates:

  • Dish washers
  • Washing machines
  • Refrigerators and freezers
  • Residential dehumidifiers
  • Room air conditioners
  • Water coolers

Fan rebates:

  • Ceiling fans
  • Residential ventilation fans

Heating and cooling equipment rebates:

  • Boilers
  • Ceiling fans
  • Central AC
  • Electric air-source heat pump
  • Furnaces
  • Geothermal heat pumps
  • Programmable thermostats

Home exterior/interior rebates:

  • Insulation
  • Roof products
  • Windows, doors, skylights
  • Lighting product rebates.
  • CFL bulbs
  • Ceiling fans
  • Decorative string lights
  • LED lighting
  • Light fixtures

Residential water heater rebates:

  • Gas condensing
  • Heat pump
  • High-efficiency gas storage
  • Solar/electric
  • Solar/gas

How do I find out which energy efficient appliance rebates are available?

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While there are a multitude of ways you can discover rebates, the easiest way is to visit ENERGY STAR®’s rebate center and type in your ZIP code. This government agency keeps track of rebates for energy-efficient appliances from a variety of resources, making it your one-stop appliance rebate shop. Typing in 06019, for instance, yielded 23 rebate opportunities, ranging from a $750 rebate for replacing a boiler to $250 for an air-source heat pump from Eversource, a utility in Connecticut. The rebates change regularly so it’s worth checking the site regularly to see if something has cropped up for an appliance you’re in the market to replace.

Discover home improvement tax credits that can save you money:


It’s worth noting that in some instances an energy-efficient appliance might qualify for both a rebate and a tax credit. Now that could be a win-win for you and the environment!

We hope this has helped you figure out how to finance some of your home energy improvements. Is there a rebate or tax credit you’ve found? Share in the comments and help us all keep track!

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