Cash For Clunkers Goes Indoors: Tax Credit To Be Available When Buying Energy-Efficient Insulation, Windows, Heaters

September 5th, 2009 11:12 PM

Is your water heater or oil furnace an energy glutton? There's hope — even better than hope, federal tax credits — if you replace it with an energy-efficient product.

The American Recovery and Reinvestment Act of 2009, the same federal stimulus program that produced Cash for Clunkers, provides tax credits to consumers who purchase qualifying energy-efficient products, including insulation, storm windows and metal and reflective asphalt shingles.

Buying new windows and doors? Replacing an old water heater with a solar-powered water heater? Putting a new roof over your head? You may be eligible for a tax credit equal to 30 percent of the cost of materials, up to $1,500 for qualifying products placed into service between Jan. 1, 2009, and Dec. 31, 2010.

And the best part about this "clunker" program is that you don't have to physically trade in your old drafty windows or central air conditioning unit. Just save your purchase receipts and the Manufacturer Certification Statement.

Here's how it works:

A tax credit reduces the amount of taxes you owe. For example: If you owe $2,000 in federal taxes, a $1,500 refundable tax credit would lower your bill to $500.

In most cases, qualifying home improvements must be made to your primary residence. In some cases, you may receive tax credits for improvements to a second home.

So what's on the list?

In some cases, not only is the product eligible for a tax credit, but the installation costs also are covered by the program. If they meet the criteria, the installation of heating, ventilation and air conditioning systems, biomass stoves, water heaters, solar panels, geothermal heat pumps, wind energy systems or fuel cells are covered by the tax-credit program. The tax credit is 30 percent of the total cost (the product plus installation), up to $1,500.

Installation costs are not covered by the tax credit for roofs, insulation, windows or doors.

And if you can't make the improvement this year or next, remember that some tax credits are available until 2016 — at 30 percent of the cost, with no upper limit — for geothermal heat pumps, solar panels, solar water heaters, small wind-energy systems and fuel cells.

For a complete list of restrictions and requirements, go to www.energystar.gov/taxcredits.

Appliances

The recovery act also provides $300 million nationwide in consumer rebates for qualified Energy Star appliances, including central air conditioners, boilers, dishwashers, refrigerators, oil and gas furnaces and other appliances.

Connecticut has applied for $3.4 million in energy rebates for state residents. Under the program, each state has been asked to develop an Energy Star rebate program, allowing leeway to select which appliances are to be covered and the amount of the rebate.

The state plans are due Oct. 15. State officials said they are still developing the plan, but it will be available on the governor's recovery agency website — www.recovery.ct.gov — on Oct. 15.

It's expected that the list will include some or all of the following Energy Star appliances: central air conditioners, heat pumps, boilers, furnaces, room air conditioners, dishwashers, refrigerators, freezers, water heaters and clothes washers.

New Car Tax Rebates

If you didn't have a clunker to cash in, this still may be a good year to buy a new vehicle. The stimulus program allows taxpayers to take a deduction for state and local sales taxes and excise taxes paid on the purchase of a qualified new car, light truck, motor home or motorcycles.

The deduction is allowed on new vehicles purchased from Feb. 17 through Dec. 31 of this year. The deduction is limited to the first $49,500 of the price. The deduction begins to phase out if you earn more than $125,000, or $250,000 if you file a joint return. For details on the program, go to www.irs.gov/newsroom, and click on "Money Back for New Vehicle Purchases."

Note: Some hybrid-fuel vehicles, diesel-fueled vehicles and other vehicles that use alternative fuels may be eligible for federal tax credits: For more information, go to www.fueleconomy.gov, and click on "tax incentives."

The website lets you compare mileage ratings, estimated annual fuel cost and the carbon footprint of various vehicles.

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