Rising energy costs have prompted many homeowners to try to make their homes more energy efficient, and the IRS has gotten on board by offering tax credits to incentivize energy efficiency. If you own a home in the US that you lived in throughout 2014 and have recently made energy-saving upgrades, you may be eligible for the Residential Energy-Efficient Property Credit, the Nonbusiness Energy Property Credit, or both.

Residential Energy-Efficient Property Credit

Homeowners who qualify for the Residential Energy-Efficient Property Credit may be able to claim up to 30 percent of costs associated with building, installing, and preparing the home for energy-efficient equipment.

Residential Energy-Efficient Property Credit

This tax credit may be applicable to:

  • Solar-powered electrical equipment
  • Solar water heaters
  • Wind turbines
  • Geothermal heat pumps
  • Fuel cells

With the exception of fuel cells, upgrades to a home other than the one your family lives in may still qualify for the credit as long as you own the home. Check back later this week for more details about home improvements that may qualify for the Residential Energy-Efficient Property Credit.

Nonbusiness Energy Property Credit

The Nonbusiness Energy Property Credit went into effect for the 2005 tax year and was extended to include qualified energy-efficiency upgrades that were made to the family’s primary home before December 31, 2014. The credit covers up to ten percent of costs associated with making the following energy-efficient home improvements:

Nonbusiness Energy Property Credit
  • New insulation if the type of insulation you installed was constructed to prevent heat exchange and meets the requirements of the International Energy Conservation Code (IECC)

  • New windows, skylights, or doors if they adhere to ENERGY STAR standards

  • Metal or asphalt roofing if it meets ENERGY STAR criteria and is designed to minimize heat gain inside your home

  • Electric heat pumps that satisfy U.S. Department of Energy guidelines

  • Central air conditioning units and electric heat pump water heaters that operate at the highest efficiency level according to the Consortium for Energy Efficiency (CEE)

  • Water heaters, boilers, and furnaces that run on natural gas, oil, or propane

  • Advanced main air circulating fans used in qualified furnaces if they meet U.S. Department of Energy requirements

  • Stoves fueled by biomass (i.e., plant-based materials)

When applying for the Nonbusiness Energy Property Credit, homeowners should keep the following credit limits in mind:

  • $500 total for all tax years since 2005

  • $200 total for windows installed between 2005 and 2014

  • $150 for a natural gas, oil, or propane furnace or boiler installed in 2014

  • $50 for an advanced main air circulating fan installed in 2014

  • $300 for any additional item installed during the 2014 tax year

Home improvement tax credits may be incentive enough to invest in energy-efficient materials and appliances for your home, but also consider the fact that energy efficiency benefits everyone. In addition to keeping your family more comfortable by improving the air quality of your home and maintaining the indoor temperature, upgrading with energy-efficient equipment is a “green” practice that helps minimize energy waste and negative environmental impact.

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Sources: IRS; U.S. Department of Energy.