When it comes to taxes, we just have to deal with them as a necessary part of day to day life. After all, where would all of our public services come from if we all paid no tax?
So, contributing your share of taxes in some way helps the greater good. Of course, most of us still wouldn’t turn down an opportunity to legitimately lower our taxes, now would we? I didn’t think so.
Additionally, if you could lower your tax liability AND do something positive for the environment – might that be a win-win?
Well, if you have some purchases to make for your primary residence (as an owner of a pre-existing home), they might fall into the category of federal tax credits for energy efficiency. Based on your situation, you could get a tax credit of up to $500 for qualifying purchases.
Here’s an overview of the 2011 energy efficiency credits:
- Biomass Stoves: $300
- HVAC
- Advanced Main Air Circulating Fan: $50
- Air Source Heat Pumps: $300
- Central Air Conditioning: $300
- Gas, Propane, or Oil Hot Water Boiler: $150
- Natural Gas, Propane, or Oil Furnace: $150
- Insulation: 10% of cost, up to $500
- Roofs (Metal and Asphalt): 10% of cost, up to $500
- Water Heaters (non-solar)
- Gas, Oil, Propane Water Heater: $300
- Electric Heat Pump Water Heater: $300
- Windows, Doors, and Skylights: 10% of cost, up to $500, but windows limit is $200
The limit is $500, which is also a lifetime limit. If you took this credit in the 2006-2010 tax years, you’ve used it up. Also, it’s a one-time credit – you can’t buy something one year and keep claiming it year after year. The home must be your primary residence.
As you can see, there are some opportunities to save on taxes in 2011! The limit was reduced this year, as it had been $1,500 for 2010. However, despite being reduced, this credit still offers the opportunity to save money.
If you have a broader timeline, there are some tax credits for energy efficiency that expire in 2016:
- Geothermal Heat Pumps: 30% of cost, with no upper limit
- Small Wind Turbines (residential use): 30% of cost, with no upper limit
- Solar Energy Systems: 30% of cost, with no upper limit
- Fuel Cells: 30% of cost, up to $500 per 0.5 kW of power capacity
For complete details and requirements/restrictions (there are some), check out Energy Savers and consult with your own financial/tax professionals before making a purchase decision for these purposes.
Clearly, to summarize, there’s an opportunity to save some money on taxes and do well by the environment. And as we know, more money saved equals more money for retirement! Anyway, with respect to the tax credits in particular, they may not be to the level that existed prior to this year, as legislation has changed that, but there are still ways to participate and save money, which is a good thing!
Thanks for the link, Squirrelers. I was looking at a couple of solar panels at Harbor Freight Tools the other day. Although only a couple hundred bucks, it didn’t even occur to me that part of that might be offset in tax credits.
101C – you’re welcome, though not sure which link you’re referring to:) Anyway, it’s worth researching tax credits before buying materials for such improvements. You never know until you check.
Wonderful job on getting the information about the tax credit all together Squirrelers. Taking advantage of this credits can help you financially both when you take the credit but through the years as you save money with more efficient appliances.
Elle – good way to put it, it might save something up front and down the line as well
You can also save money by buying materials for home improvement projects used. Things like the Habitat for Humanity ReStore specialize in selling solid building products that would have otherwise ended up in a landfill. Good for your wallet, a charity, and the environment.
No Debt MBA – that’s a good idea, used materials ought to be available at a discount. Helping others is really good thing as well. Interesting idea with used materials!
Very informative! When we bought new appliances, in the fine print we found that we are eligible for cash back from a local power company since these appliances were energy efficient (energy star)!
We don’t even buy power from that company, but it clearly mentions that that is not a requirement.
I do not know how common this is, but always read fine prints – sometimes it leads to free cash!
Moneycone – you’re so right about reading the fine print. Actually, this matters not only for possible free cash but for pitfall as well:) Anyway, that’s cool that you found out after the fact that you were eligible for cash back.
Thanks for the reminder. We know that we’re going to have to replace our AC unit and the water heater in the next few years. Didn’t even think about the tax credit.
Kay Lynn – keep the credit in mind! It’s worth looking ahead of time.
These are great green saving tips. We should utilize the govt grants as far as possible while making environment clean
SB – glad you liked the savings tips. I agree that we should consider the incentives when making choices.
I used up the energy efficiency tax credits through the replacement of a couple windows in 2009 and a storm door in 2010. I had to do the replacement anyway, so why not get a tax credit!
Linda – I wholeheartedly agree! Curious, did the store/business mention anything about such credits when you made your purchases?
I love tax credits but I used up my lifetime limit long ago. The best part about credits is that they come right off the top so if you’re at a high income bracket, you get a credit off of your highest taxed dollars.
First Gen – if you used up your lifetime limit, at least it’s better than not ever knowing that these credits exist!
I’ve been mulling over installing a tankless water heater. Our tank is original to the 1999 buildout of the house, and it’s close enough to a finished portion of the basement that it makes me very nervous given its age. A tankless system would cost a bundle to install (especially since I would most likely have to re-locate it to a different part of the basement for installation purposes) but for the peace of mind and the buyback on the reduced costs, it could potentially be worth it.
Money Beagle – I’m not sure of the lifespan of such a a heater, but it’s good to be proactive about such concerns with an existing tank. The last thing anyone wants is to deal with this type of problem once it’s too late. Good that you’re thinking about this now.
We took advantage of this credit in the past (I think new windows qualified for it at the time). It came in handy, especially since we intended to do the home improvements anyway.
I love tax credits! We definitely need a new front door, and we need one as efficient as possible since our house faces the blazing sun. (Ok, since I live in Michigan, I don’t see the sun as much as others, but still…)
We have already replaced all our windows, AC, furnace and washing machine. Next will be the door, and I think I need to add some attic insulation too.
Great, informative post Squirrel!
Great post! This is really informative Squirrelers. Thank you for reminding us about the federal tax credits for energy efficiency. 🙂
Upgrading the water heating equipment into solar water heaters during renovation could definitely help. Although they are a bit pricey at first, the system will pay for itself as the energy it uses comes from the sun which is free. Not only will you save money, but you are also using a very environmentally friendly source of energy.
I was going to replace my house’s roof and I’ve found out that there are some materials that meet IRS criteria for energy-efficient homes (metal roofs with specially pigmented coatings designed to reflect sunlight and asphalt roofs that contain cooling granules are acceptable). I can’t wait applying these changes and why not, obtaining those energy savings tax credits.