Extra Tax Credits Sweeten "Cash for Appliances"

Save Money on Home Appliances and Get a Bigger Tax Refund

Sep 21, 2009

Upgrade Your Home and Get Tax Credits, bowlingranny

Consumers buying new appliances under the government Cash for Appliances program may also qualify for tax rebates under Obama's American Recovery and Reinvestment Act.

Going green with energy efficient home appliances and home improvements is a smart move but especially savvy with new Cash for Clunker Appliances initiatives sponsored by the Obama administration. In addition to appliance rebates offered in the 2009 – 2010 Cash for Clunker Appliances incentive rebate program through the United States Department of Energy (DOE), policy makers are offering IRS tax rebates for home energy improvement investments. Yes. It is double dipping, and it's perfectly legal to buy through Cash for Appliances and take the energy saving appliances tax credits.

Which Home Improvements or Appliances Qualify for Federal Tax Credits?

It’s important to do research before buying home appliances or doing home upgrades, since some home investments qualify for tax rebates and some do not. In addition, the appliances and materials for Cash for Appliances and the green home upgrades must meet guidelines developed by the federal government through the Energy Star program.

For existing homes (versus new construction), the following improvements are currently eligible for federal tax credits for energy efficiency as noted at Energy Star (online):

Windows/Door/Skylights (varying requirements depending on time of purchase – but look for the National Fenestration Rating Council NFRC certification)
Insulation (meeting International Energy Conservation Code IECC 2009 specifications)
Roofs (metal and shingle with Energy Star coatings or cooling granules)
HVAC (includes some central air conditioning systems as well as heat pumps, furnaces, and advanced main air circulating fans)
Water Heaters (covers some gas, propane, oil, and electric heat pump models)
Biomass Stoves (burning biomass fuels for home or water heating)

Taxpayers can earn credits at 30% up to $1500 for 2009 and 2010. This program does date back to January 2009, so consumers may want to do some research and round up receipts for qualified home investments to satisfy the IRS.

For both existing homes and homes under construction, the following home energy investments can qualify:

Geothermal Heat Pumps (based on Energy Star criteria)
Solar Panels (requires certification by the Solar and Certification Corporation SRCC)
Solar Water Heaters (requires SRCC certification and water must be used in the home)
Small Wind Energy Systems (must have nameplate capacity of no more than 100 kilowatts)
Fuel Cells (requires efficiency at 30% or higher)

Tax credits check in at 30% of the cost invested, but there’s no limit on these investments, and taxpayers can take advantage of these green tax credits through 2016.

How Do Qualifying Energy Efficient Home Investments Impact on Taxes?

The math is pretty simple for homeowners who take the time to make the right home improvement investments or green house building strategies under The American Recovery and Reinvestment Act of 2009. If a consumer upgrades on specific projects and with specific products following the federal Energy Star guidelines, a tax bill of $5000 would be reduced by $1500 at the maximum on the limited investment upgrades. Instead of paying $5000 in taxes for the year, the taxpayer would pay only $3500. That's money in the pocket and a great way to end a fiscal year.

Do Any of These Home Improvement Investments Qualify for the Cash for Appliances Rebates?

Although the Energy Star tax credits cover upgrades in 2009 and 2010 and beyond with some home energy saving upgrades or installations, consumers can save even more by cashing in on the Cash for Appliances or Cash for Clunker Appliances rebates slated for late 2009 and 2010.

Energy Star rated heating systems, cooling systems, and water heaters are eligible for instant rebate cash back ranging from $50 to $200. Not all Energy Star systems meet the more stringent tax rebate guidelines, and some investments (refrigerators, freezers, washing machines etc.) do not qualify for tax credit. So, it pays to compare and consider the extra savings on taxes when making Cash for Appliances decisions.

While Energy Star rated appliances tend to run more in terms of cost than those that do not quality, these extra savings with Cash for Appliances and the federal tax rebates may make a few extra dollars well worth the initial investment. if you're thinking about updating your kitchen or adding a heating/cooling system.

Read more about Obama's Cash for Appliances and about Energy Star Ratings for appliances and check out information on Energy Star home water heaters.

The copyright of the article Extra Tax Credits Sweeten "Cash for Appliances" in Personal Tax Planning is owned by Cyndi Allison. Permission to republish Extra Tax Credits Sweeten "Cash for Appliances" in print or online must be granted by the author in writing.