In the past, federal tax credits were available for energy efficiency improvements made to primary residences. Eligible upgrades included:
- heating and cooling equipment
- water heaters
- insulation and roofs
In most of the cases homeowners could qualify for these tax credits by meeting the energy efficiency requirements associated with ENERGY STAR certified products.
Those energy efficiency tax credits were enacted by Congress as part of the American Recovery and Reinvestment Act of 2009. Also known as the Stimulus Bill, it expired in December of 2016, and there are no plans to reinstate these federal tax credits.
Residential energy efficient property credit today
Today, the only federal tax credits for energy efficiency improvements that remain in effect are for solar energy systems. According to the IRS this tax credit is known as the Residential Energy Efficient Property Credit (Section 25D).
The Residential Energy Efficient Property Credit is a credit of 30 percent of the expenditures (cost including installation) made by a taxpayer during the taxable year. Solar equipment that may qualify includes:
- Qualified solar electric systems
- Qualified solar water heaters
- Qualified fuel cell property
- Qualified small wind energy property
- Qualified geothermal heat pumps
The credit for solar electric property and solar water heating property is extended for property placed in service through December 31, 2021. (The credit is only available for dwelling use, not for pools or hot tubs.)
Qualified solar water heaters must meet these requirements:
- Must get at least half of its energy from the sun
- Must be certified by the Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state where the equipment is installed
- Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements
Homeowners may only claim spending on the solar water heating system of the household.
All ENERGY STAR certified solar water heaters qualify for the tax credit.
To apply for this tax credit, file tax form 5695 with your tax return. For more information on homeowner credits and deductions visit IRS.Gov.