Did you know that you may qualify for a tax credit of up to $500 if you own or install an energy-efficient system? And even more – potentially thousands of dollars – if you install a renewable energy system? It’s very easy to find out, as we’re about to show you!
This is an incentive program being provided by the federal government and Energy Star. If you have energy-efficient products or renewable energy products (such as a geothermal heat pump, which we here at Ernst can install for you!), then you should definitely be all ears for our explanation of these tax credits!
How Much Will I Get?
Good question! It all depends on the year that your equipment was installed, and what type of equipment it is.
For renewable equipment:
If it was installed between January 1, 2017 – January 1, 2020, then the credit is 30% of the cost of the equipment that was installed in your home (including the installation cost).
If your renewable energy equipment was installed:
After January 1, 2020, but before January 1, 2021 = 26% off
Between January 1, 2021- January 1, 2022 = 22% off
Q: So what happens if this tax credit ends up being so large that it’s more than your owed tax?
A: Well, the unused part can be credited to your tax return for the next year!
But of course, not everyone has a geothermal heat pump, solar equipment, or fuel cells. Are there still any possible ways that you can get the tax credit?
For energy-efficient equipment:
You may have heard that tax credits for residents with energy-efficient equipment has unfortunately expired, and that was true up until recently.
But tax credits were just extended through December 31, 2020!
For energy-efficient equipment, the tax credits apply from tax years 2018 through 2020.
Also, another stipulation you should know about is that it must be your primary home. So if it’s a vacation home, or you flip houses and it’s a rental, etc., unfortunately these credits don’t apply. However, just a reminder that when it comes to geothermal heat pumps and solar products, vacation homes/second homes are in fact eligible for the credit!
When it comes to the exact tax credit amounts for different Energy-Star-certified systems, we will refer you to the Energy Star website, because it’s different for every system, and each system also has its own list of requirements when it comes to what is considered efficient enough to qualify. (seasonal energy efficiency ratio (SEER)/ annual fuel utilization efficiency (AFUE) ratings).
Just to give a couple examples, gas furnaces must have an AFUE equal to or above 95, and the tax credit amount is $150.
A central A/C system must have a SEER rating greater than or equal to 16, and the tax credit amount is $300.
It’s very easy to get these tax credits, especially now that the deadline has been retroactively extended! Here is a link to the instructions for the form used to apply for these credits.
Of course, we are no substitute for your tax preparer/advisor, and we recommend you go to them for any further questions you may have.
Energy-efficient or renewable systems save you money in the long run, not only because of the tax credits, but because of the money saved on bills year-over-year. We’d be happy to answer any questions you have on the subject, or any questions about installing energy-efficient systems. Contact us online or call 618.217.1836 – we’re always trying to save you money!