Taxpayers may be able to claim a tax credit for home improvements which make use of renewable sources of energy, such as:
- Solar panels
- Solar powered hot water heaters
- Wind turbines
- Geothermal heat-pumps
- Fuel cells
The energy efficiency tax credit is a "non-refundable" credit which means the credit will lower your tax liability, but cannot increase a refund.
Example: Let’s say, you owe $5000 in federal taxes this year and you claim a $2000 tax credit. The tax credit would lower your tax liability leaving a balance of $3000 due.
What is the Taxpayer Certainty and Disaster Tax Relief Act
The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended the nonbusiness energy property credit to property placed in service from 2017 to 2021. The maximum allowed credit for all improvements is $500.
- Insulation materials and systems designed to reduce a home's heat loss or gain
- Exterior doors and windows (including skylights) ---meet or exceed 6.0 Energy Star Rating
- Pigmented metal roofs designed to reduce heat gain, and asphalt roofs with appropriate cooling granules, which are Energy Star certified.
The credit for these purchases is equal to the cost of the equipment up to the amount of the caps as listed below:
- Advanced main air circulating fan: $50
- Natural gas, propane, or oil furnace or hot water boiler: $150
- Electric heat pump water heater with an energy factor of at least 2.0: $300
- Central air conditioner which achieves the highest efficiency: $300
- Natural gas, propane, or oil water heater which 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 available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers". Systems must have a thermal efficiency rating of at least 75 percent to qualify: $300