Energy Efficiency Tax Credits to Take on Your 2011 Tax Return

December 19, 2011 | By: TaxCure Staff

Energy Efficient Tax CreditsPresident Obama extended several tax credits through 2011, including a number of home improvement energy efficiency tax credits. Many of the energy efficiency tax credits allowed in 2011 and beyond are lower than they had been previously. Last year, tax credits for energy efficiency improvements were as high as 30% of the improvement (up to $1,500), but for 2011, most of the tax credits are only 10% of the improvement (up to $500).

Still, a credit is a credit and you should file for all credits that you’re eligible for. However, it is important to note that if you have already received energy efficiency tax credits between the years of 2006 and 2010 in excess of $500, you are not eligible for additional energy efficiency tax credits. If you have not already claimed over $500 in energy efficiency tax credits, then here is what you will need to know to determine whether or not you qualify for to claim this credit for 2011:

2011 Tax Credits: 10% Up to $500

If replacing or adding the following to an existing home that is your principal residence (rentals or new construction are not eligible), you can claim a tax deduction of 10% either up to $500 or up to the specified, individual product maximum limits:

  • Biomass Stoves that have minimum efficiency ratings of 75%. The tax credit is capped at $300.
  • Insulation, including batts, blow-in fibers, rolls, expanding spray, weather stripping, house wrap, caulk and spray foam.
  • Heating, Ventilation, Air Conditioning (HVAC) equipment, including furnaces (capped at $150), electric heat pumps (capped at $300), boilers (capped at $150), central AC (capped at $300), and main air circulating fans (capped at $50).
  • Metal and Asphalt Roofs (not including installation costs).
  • Windows and Doors
  • Non-Solar Water Heaters (natural gas, oil, propane or hot water boilers). Furnaces must be 95% efficient and are capped at $200 credit.

These tax credits expire on December 31, 2011.

2011 Tax Credits: 30% of Cost, No Maximum Limit

If upgrading your existing home or building a new home as your principal or second residence, you can claim 30% of the cost (including installation) with no maximum limit for the following energy-efficient improvements:

  • Small Wind Turbines
  • Solar Energy Systems
  • Geothermal Heat Pumps

This tax credit expires on December 31, 2016. Rental homes do not qualify for this tax credit.

2011 Tax Credits: 30% of Cost up to $500 per .5kW of Power Capacity on Fuel Cells

If installing a microturbine system in your principal residence, existing or new construction, you are eligible to take a tax credit in the amount of 30% of the cost up to $500 per .5kW of power capacity. The same rules apply to the installation of residential fuel cells, but only for those installations made to your principal residence.

This tax credit expires on December 31, 2016.

How to File for 2011 Energy-Efficient Tax Credits

If you install and place an eligible product in service during 2011, you will need to file IRS Form 5695 with your 2011 tax return. This form will be available at the start of 2012. On your IRS Form 1040, you will include the amount of your energy tax credit on the line indicated. Make sure to keep your manufacturer’s certification statement and purchase receipt.

Tax credits reduce your tax liability dollar for dollar. If you are owed a tax refund, a tax credit will increase your refund by as much as the credit is worth.