|
 Contact Us
 

By making energy efficient choices, you can save energy costs, improve the environment and possibly reduce your federal taxes.  

  • You may be able to claim tax credits on your 2007 income tax return for energy efficiency improvements you made to your home in 2007. 
  • Get the details on 2006 IRS form 5695. Access a printable version of the form and instructions at http://www.irs.gov/pub/irs-pdf/f5695.pdf or call toll-free 1-800-TAX-FORM to order it. The IRS will mail it to you at no charge.
  • A credit is much better for your pocketbook than a deduction because a credit is actually subtracted from the amount of tax you owe not just deducted from the income you pay tax on.  For example, if you are in a 10% tax bracket and you are allowed to take a deduction of  $500, you would save $50 on your taxes, but with a credit you get to subtract the full $500 from the tax you owe, so you would save $500 instead of $50.   
  • Credits are available for energy efficient insulation, windows, skylights, doors, specially coated metal roofing that helps keep the heat out of your home, water heaters, geothermal heat pumps, central air conditioners, furnaces and fans. There are even credits available for solar and fuel cell systems you can use for your home.
  • There are different dollar amounts for each item under the credits, and below are some items covered by the credits.
 Product
  
Maximum Credit
Qualified investments in a solar panel system and another equivalent credit for investing in a solar water heating system at your home. No part of the system can be used to heat a pool or hot tub.
  
$2,000
Insulation systems that reduce heat loss or gain, exterior windows and doors, and specially coated metal roofing that keeps the heat out of your home.
  
$500

Electric Heat Pump Water Heater,
Electric Heat Pump, Geothermal Heat
Pump, Central AC

  

$300

Natural Gas, Propane or Oil Water Heater, Furnace or Hot Waster Boiler

  

$150

Advanced Main Air Circulating Fan

  

$50
   
  • We all know that nothing is simple with the IRS, and these energy efficiency credits are “wasteable” credits unlike the “non-wasteable” Earned Income Tax Credit, which can actually result in “negative” taxes and a payment from the IRS to the taxpayer. Alternative Minimum Tax rules may also prevent some taxpayers from claiming the credits.
  • When shopping for products that qualify for the credit look for a Manufacturer’s Certification Statement in the packaging or on the product website. The statement will say that the product or component qualifies for the credit allowed under section 25C. Keep this statement and your receipt for your records. 
  • Check out the Energy Star website for specific ways you can make your home more energy efficient and claim a credit on your taxes. Energy Star is an energy efficiency and environmental program run by the Department of Energy and the Environmental Protection Agency. For a handy chart of items covered by the credits go to www.energystar.gov and under “News You Can Use” click on “Tax Credits Under the Energy Bill.” (Direct link: http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#1)

(Note: this chart has not been updated since the IRS guidance was issued)

For more technical and detailed information read the technical analysis and/or the instruction page included in the 5695 form. Technical Analysis.pdf

 
 
 
© 2008 copyright, City of Houston. All Rights Reserved