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Basics of 2009 Energy Efficient Tax Credits

This article was written by in Taxes. 5 comments.


As a result of the American Recovery and Reinvestment Act of 2009 (see our roundup of ways to take advantage), 2009 and 2010 are good years to make some of the “green” home improvements you may’ve been considering. I’ve had a little trouble, however, navigating and understanding the many tables and footnotes, so I’m condensing the basics here for our mutual benefit.

Tax Credits for Smaller Improvements

I’m sure we all wish we had geothermal energy and solar roofs and that we were selling our unused energy back to the electric company, but installing those things is still a huge initial investment. Here are the more likely things we can do in the meantime, and get a special benefit when it comes time to do our taxes, not to mention saving money on monthly electricity bills.

Get back 30% of the cost of any of the following. You can implement any combination of this list, but your total tax credit won’t exceed $1,500. Also noteworthy: these don’t apply to building a new house (there are separate tax credits for new home builders as well as commercial buildings and cars).

Be Prepared and Pay for the Right Things

Don’t get caught without the right equipment or paperwork. Here’s what you need to do in order to benefit for the next two tax seasons.

  • Equipment must be able to last for at least five years – a two-year warranty is sufficient to prove this.
  • Not every equipment model qualifies – and if it was placed in service before Feb. 17 2009, the qualifications are different. Click an option in the list above for more.
  • Save your receipts and warranty
  • Improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) — use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010

Published or updated April 10, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 5 comments… read them below or add one }

avatar tom

I assume that this credit is just for materials, or is installation included?

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avatar Smithee ♦1,358 (Quarter)

Good question.

You get 30% back including installation costs for heating and cooling equipment, but only product costs for windows, insulation, and other parts of the building “shell.”

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avatar JNC

Is there any income limitation to obtain the tax credits?

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avatar Masters Commission

Okay, so I’m teaching a financial class to my students in May… Here is the question for 2009 VS 2008…

The 2008 version of the form 5695 only grants you a Tax Credit in that it reduces your Tax Liability on line 53 of your US1040 and there was a $2000 cap in the solar category. You could get $2000 or 30%, whichever was less.

For 2009, I’ve found websites (www.EnergyStar.gov) and solar installers who claim that the $2000 limitation has been removed and now you can get the full 30% of the system cost. But I haven’t found anyone who can tell me if this is going to be a (1) Tax Deduction (reduction in Adjusted Gross Income and therefore only reduces the income on which we are taxed, meaning I only get 30% of the 30% back if I’m in the highest tax bracket), (2) a Tax Credit (only good against existing tax liabilty and then it would either be carried backward, forward, or is not carryable to another year) or (3) a Refundable Tax Credit (where if you have more credit, then you have tax liability, you can still get the excess back in cash when you file).

EnergyStar.gov claims the 2009 form 5695 won’t be available until the end of 2009. Please point me to a resource that shows whether the 2009 filing rules will fall into option 1, 2 or 3. Thanks

–Drew–
SouthEastern PA
Master’s Commission

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avatar Charlie Booras

Does this include appliances, such as washers, dryers, and refrigerator?

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