Use tax credits to fund efficiency upgrades

Use tax credits to fund efficiency upgrades

By Megan McKoy

The idea of living in a more efficient home—and paying lower utility bills—has widespread appeal. But finding ways to fund improvements can be difficult during hard economic times.

Fortunately, the federal government offers two ways to recover some of your expenses when planning upgrades: energy efficiency tax credits and renewable energy tax credits.

Through the 2009 American Recovery and Reinvestment Act—know as the federal stimulus bill—Uncle Sam offers a personal tax credit of up to $1,500 for energy efficiency measures made at existing homes in 2009 and 2010. You can recover 30 percent of the cost of adding insulation materials and exterior doors, windows, and roofs designed to help reduce your home’s heat loss or gain. The credit also covers efficient central air conditioners, air-source heat pumps, hot water boilers, and biomass stoves.

With a maximum value of $1,500 for all improvements made in 2009 and 2010, the credit may be applied toward material costs on all projects. You can also use it on installation costs for heating, ventilation and air conditioning systems and biomass stoves.

If you want to start generating your own power, consider taking a renewable energy tax credit covering 30 percent of the cost of materials and installation for solar panels, solar water heaters, and geothermal heat pumps. This credit applies to both existing homes and new construction. Projects must be placed into service between January 1, 2009, and December 31, 2016.

ENERGY STAR, a joint program of the U.S. Department of Energy and the U.S. Environmental Protection Agency, provides guidelines on what qualifies for both tax credits at, keyword “Tax credits.”

You can file for energy tax credits using IRS Form 5695. Remember to get a Manufacturer Certification Statement (a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit) for your records. Both of the energy tax credits are non-refundable—they can increase your refund by reducing the taxes you owe, dollar for dollar, and can be carried forward to reduce your taxes in following years. But you don’t get a separate check for the credit amount.

Some electric cooperatives and state government offices offer further subsidies or rebates to consumers who want to make their homes more efficient. For a listing of state and local energy efficiency assistance available, visit the Database for State Incentives for Renewables & Efficiency, a project funded by the U.S. Department of Energy, at  

Source: ENERGY STAR, Database for State Incentives for Renewables & Efficiency

Megan McKoy writes on consumer and cooperative affairs for the National Rural Electric Cooperative Association, the Arlington, Va.-based service arm of the nation’s 900-plus consumer-owned, not-for-profit electric cooperatives.

2 Responses to “Use tax credits to fund efficiency upgrades”

  1. Barbara MacGregor says:

    Putting solar panels or wind turbines on individual homes is not always a realistic possibility due to potential site issues: shade from trees, slant of the roof etc.etc.
    1. Could Arrowhead cooperative members use their individual tax credit potential to collectively build solar panels at Arrowhead Electric? This would allow many more individuals to take advantage of the incentives offered at the state and national level and reduce our dependency on coal fired electric plants.
    2. Could a group of individuals, cluster together geographically and site solar panels? Do you know of any areas around the country where this had been done.
    3. Where can we learn more about examples of individuals, groups, cities that have lead by example in using their tax credits for solar gain.?

    • arrowelec says:

      A very good point. As you mentioned, property conditions such as lack of wind, shade trees and even asthetics are major issues when siting wind and/or solar installations. It is possible for a cooperative to build an installation and lease the production to members. The payments can be arranged in a few differing ways and their are utilities that do this today – although not many. Their are many reasons this isn’t done more often. One is the risk the cooperative takes in building the facility and then not having members pay for the leasing or incremental price increase of the energy although this could potentially be a mute point if the cooperative were to get contractual agreements prior to the construction to ensure payment of the facility. Arrowhead Electric does have wind program. We call it Wellspring and members can purchase 100kWh blocks of energy at a premium price. This money is then put into an account at Great River Energy and facilitates utility scale wind development. Our office can arrange set-up of this program any time by calling us at 218-663-7239.

      Re tax credits, I’m unsure at the moment if the cooperative would be able to utiliize homeowner credits to build this system but I suspect that would not be allowed. Outside of the cooperative a group of people could purchase property, build a generation facility (solar or wind) and sell it back to the cooperative. This would be a joint venture by members and dependent upon the size of the system, the cost of the energy and other factors Arrowhead Electric may or may not purchase the power. This is similar to CCLEP (Cook County Local Energy Projects) investigation.