What is the Residential Energy Efficient Property Credit?
The Residential Energy Efficient Property Credit is a tax credit that homeowners can claim for making energy-efficient improvements to their homes. This credit was introduced as part of the American Recovery and Reinvestment Act of 2009, which aimed to stimulate the economy and promote environmentally friendly practices.
How much can you receive in tax credits?
The amount of tax credit you can receive varies depending on the type of improvement you make. For solar electric systems, solar water heating systems, small wind turbines, and geothermal heat pumps installed in your home, you may be eligible for a tax credit equal to 30% of the cost of equipment and installation.
For fuel cells installed in your primary residence, you may be eligible for up to $1,000 per kilowatt-hour (kWh) of capacity. The maximum credit amount for residential fuel cell installations is $7,500.
It’s important to note that there are limits on how much total tax credit you can receive per year for all qualifying improvements combined. For example, between 2017-2019 this limit was set at $500 per half-kilowatt hour (kWh) capacity with no cap while those who did not use any past years’ credits were capped at $5K + inflation adjustment.
What kind of upgrades qualify for this program?
To qualify for this program, upgrades must meet certain criteria:
– Solar panels: Panels must generate electricity used within your home.
– Geothermal Heat Pumps: Must meet ENERGY STAR requirements.
– Small Wind Turbines: Must have a nameplate capacity rating under 100 kW.
– Fuel Cells: Have an efficiency rating greater than or equal to 30%, and have a capacity below one megawatt (MW).
Additionally these products should either be brand new or if it’s secondhand then it should never been put into service before by anyone else other than the eligible taxpayer.
How can you claim this tax credit?
To claim this tax credit, you must file IRS Form 5695 with your federal income tax return. The form will ask for information about the qualifying property and improvements made, as well as the total cost of those upgrades for each type of improvement; Solar Panels, Geothermal Heat Pumps etc.
It is important to keep all receipts and documents related to these improvements in order to accurately calculate your tax credit. Additionally, if you install solar panels or a geothermal heat pump in your home, you may need to have a licensed professional verify that the system meets ENERGY STAR requirements before claiming the credit.
Conclusion
The Residential Energy Efficient Property Credit is a valuable incentive for homeowners who are interested in making energy-efficient upgrades to their homes. By taking advantage of this program, homeowners can not only lower their energy bills but also reduce their carbon footprint while receiving valuable financial incentives from the government.