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Tax credits for energy-efficient upgrades to expire

Projects completed in the next 3 months are eligible

Published: October 01, 2013 08:30 PM

A $500 tax credit for energy-efficient upgrades expires at the end of the year so now’s a good time to tighten your home’s envelope by replacing drafty windows or entry doors or insulating your attic. Some heating and cooling equipment also qualify for the tax credit, which was extended last year as part of the American Taxpayer Relief Act. Here are the details.

Claims can only be made for your primary residence. And to be eligible, homeowners must not have made a claim in the previous six years during which the program was active. Other requirements are outlined on the websites for EnergyStar and the Database of State Incentives for Renewables & Efficiency.

Doors, windows and insulation
Homeowners can apply for a tax credit worth 10 percent of the cost of upgrading the efficiency of the home’s envelope. The cost of installation is not included and the credit is capped at $500. The following improvements are eligible for the tax credit.

  • Insulation materials designed to reduce a home's heat loss or gain.
  • Exterior doors and windows (including skylights) but no more than $200 in total credits for windows.
  • Asphalt roofs with appropriate cooling granules and pigmented metal roofs designed to reduce heat gain.

Heating, cooling, and water heating
Taxpayers who purchase HVAC equipment that meets federal requirements can apply for tax credits equal to the full cost of the equipment up to the following caps, as outlined by DSIRE:

  • Advanced main air circulating fan: $50.
  • Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150.
  • Electric heat pump water heater with an energy factor of at least 2.0: $300.
  • Electric heat pump that achieves the highest efficiency tier established by the Consortium for Energy Efficiency (CEE): $300.
  • Central air conditioner that achieves the highest efficiency tier established by the CEE: $300.
  • Natural gas, propane, or oil water heater that has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300.
  • Biomass stoves that use plant-derived fuel such as wood pellets: $300.

To collect your tax credit, you'll need to file IRS form 5695 with your 2013 taxes. Be sure to keep a copy of the Manufacturer's Certification Statement and any receipts or itemized bills. And to find energy-efficient products, check our buying guides for windows, appliances, and water heaters. Find more ways to save in our recent report, “Bright Ideas That Save Energy and Money.”

—Mary H.J. Farrell

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