Energy tax credits at a glance

Uncle Sam wants you to save energy, and he's putting his money where his mouth is. The American Recovery and Reinvestment Act of 2009 includes tax credits for making your home more energy efficient. The credits cover 30 percent of projects finished in 2009 and 2010, up to $1,500 for the two years for most projects. But they don't include installation costs for insulation, sealing air leaks, windows, doors, and roofs. Solar, wind, and geothermal projects qualify for up to 30 percent of their cost, not just $1,500.

Unlike deductions, tax credits directly reduce the amount of tax you owe. If the project involves renewable energy, such as solar or wind, the cap is waived and the credit can be carried over to future years. If you're subject to the Alternative Minimum Tax, you might want to get your project done in 2009 because the tax credits will be limited by the AMT in 2010 unless Congress changes the law. To claim the credits, you'll need to file IRS Form 5695 with your taxes for the year in which the job was completed.

Be sure to keep a copy of the Manufacturer's Certification Statement and all receipts and itemized bills. Actual costs and savings will vary depending on the size, age, location, and condition of your home.

Federal energy tax credits don't cover appliances, programmable thermostats, and room air conditioners, but state governments and utility companies often offer rebates on energy-efficient models. For more information, go to the Database of State Incentives for Renewables & Efficiency, at www.dsireusa.org.