5 Things to Know Before You Claim Your Energy Tax Credit: Part 1

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Some of the materials you may need this year include receipts, forms, and manufacturer certification statements from any energy-efficient purchases you made last year. Take another look at which products are eligible for energy efficiency tax credits.

If you bought one of these products that qualify for a tax credit, there are a few things you should know:

  1. Know Your Forms
    Use the 2009 version of the IRS tax form 5695. Submit this form with your taxes. On the 2009 1040 form, claim your credit on line 52.

    You cannot file the 1040 EZ form or 1040A form if you want to claim the energy efficiency tax credits.

    Keep your receipt and manufacturer certification statement for your records, but you do not need to submit these with your taxes.

  2. Know Your Credit Maximums
    For energy efficiency products, you can purchase one or more products and receive a 30% credit, for a maximum credit of $1,500. This maximum applies to the two year period of 2009 and 2010; if you receive the maximum in 2009, you are not eligible for more credits in 2010. If you only receive, say, a $700 credit in 2009, you can still purchase more products in 2010 and receive up to an $800 credit when you file your taxes next year.

    The products that fall under this limit include biomass stoves, HVAC, insulation and air sealing materials, roofing, water heaters (non-solar), and windows and doors.

    Some products, however, are eligible for a 30% credit and are not subject to the $1,500 maximum. These include geothermal heat pumps, solar energy systems (including solar water heaters), wind energy systems. Fuel cells are also not subject to the $1,500 maximum, but are limited to $500 per .5 kW of power capacity. Tax credits for these products are available through 2016.

    See more details on products eligible for tax credits.

  3. Know Which Credits Can—and Cannot—Be Carried Over
    The credit for products that fall under the $1,500 maximum CANNOT be carried over to future years. They also cannot be carried over from 2009 to 2010, but you can take part of the total credit available in 2009 and part in 2010 (if, for example, you buy one product in 2009 and another in 2010).

    The credit for products that are not subject to the $1,500 maximum can be carried over to future years, as long as the credit is still in effect (through 2016). Since you can't get back more in tax credits than you paid in taxes throughout the year, this allows you to carry forward any portion you weren't able to claim.

  4. Know When the Credit Includes Installation Costs—and When It Doesn't
    For some products, you can include the cost of installation when figuring the credit. These are:
    • Biomass stoves
    • Central air conditioners
    • Air-source heat pumps
    • Furnaces and boilers
    • Advanced main-air circulating fans
    • Water heaters
    • Geothermal heat pumps
    • Solar energy systems (including solar water heaters)
    • Wind energy systems
    • Fuel cells

    Be aware that you can install the products above yourself, but you cannot claim labor and installation costs if you do so.

    For these products, do NOT include the cost of installation when figuring the credit:
    • Insulation and air sealing products
    • Roofing
    • Windows and doors

  5. Know How to Handle State and Local Incentives
    If you are eligible for multiple incentives for your purchase, you may need to subtract some amount before calculating your tax credit.

    In short: you DO need to subtract any utility rebate you received, and you MAY need to subtract any state or local rebate you received (depending on whether it was taxable). ENERGY STAR® has a great FAQ covering the details of what to do if you're eligible for both a tax credit and rebate.

    If you've received state or local financing, you do NOT need to subtract that financing. See ENERGY STAR's FAQ on state and local financing to learn more about what kind of financing applies.




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Chris Sonaggera

Keller Williams Elite, www.BuyInOKC.com
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