Are Home Energy Improvements Tax Deductible?

erc - home energy improvements tax deductible

erc - home energy improvements tax deductible It’s tax time. Don’t forget that you can claim a tax credit for energy efficiency improvements you made to your home last year.

While most home energy efficiency improvements aren’t tax deductible, you can claim a tax credit, which is even better because it doesn’t just reduce the income you’re taxed on, it reduces the actual taxes you pay.

There are two Federal tax credits that help offset the upfront expense of those energy efficiency investments that will save you on your energy bills for years to come.

Nonbusiness Energy Property Credit

This credit expired in 2013, but the legislature voted to extend it so homeowners who made improvements during 2014 can still claim it. There is discussion about extending the credit even longer, though that hasn’t happened yet.

If you added insulation, replaced exterior windows or installed more efficient HVAC systems in your home in 2014, you can file for this tax credit. You can claim credits of 10 percent of your total cost up to $500. The tricky thing is that the $500 limit is cumulative. So, if you claimed a $200 credit in 2005 when the program launched, you can only claim up to $300 for the 2014 improvements you made.

These are some of the allowable credits and their maximum payouts:

  • $300 for biomass stoves
  • $50 for advanced main air circulating fans
  • $300 for air source heat pumps
  • $300 for central air conditioning
  • $150 for gas, propane, or oil hot-water boilers
  • $150 for gas, propane, or oil furnaces
  • $300 for gas, propane, oil, or electric heat pump water-heaters
  • $500 for energy-efficient doors (installation costs do not count)
  • $500 for energy-efficient skylights (installation costs do not count)
  • $200 for energy-efficient windows (installation costs do not count)
  • $500 for insulation (installation costs do not count)
  • $500 for metal or asphalt roofing (installation costs do not count)

Residential Energy Efficient Property Credit

The Residential Energy Efficient Property Credit rewards homeowners who install onsite energy generation equipment, such as solar panels, with a 30 percent tax credit.

This is an awesome program that has helped to drive renewable energy generation installation nationally. The 30 percent tax credit has no maximum payout and the credit can be spread over multiple years if your tax liability isn’t big enough to take advantage of the whole credit in one year. It applies to geothermal heat pumps, small wind turbines and solar energy systems in first and second homes and to fuel cell technology in primary residences.

Colorado energy efficiency tax deductions

Colorado does not offer any state tax incentives for energy efficiency upgrades or for distributed generation. However, the state does provide rebate programs for energy efficiency improvements and on-site generation in areas where the utility companies don’t.

Learn more about rebates from Xcel Energy and Colorado Springs Utilities at the Energy Resource Center’s website.

Getting help to make home energy upgrades

If your home energy bills are unmanageable and you don’t have the financial resources to make energy efficiency upgrades on your own, contact the Energy Resource Center. We help people in Denver, Colorado Springs, the San Luis Valley and all over Colorado make energy efficiency improvements for free.

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