How to Qualify for Energy Efficiency Tax Credits in 2020
Making energy-efficient improvements to your home can help you lower your energy consumption and utility bills over time. It’s also a great way to do your part to fight against global warming and save the environment. However, implementing eco-friendly energy solutions can be costly because it may involve the purchase of expensive equipment or extensive remodeling. Fortunately, the federal government offers tax credits for a wide range of energy-efficient home improvements, which can help you save substantially if you qualify. The following is a list of energy-efficiency tax credits available in 2020.
Nonbusiness Energy Property Tax Credit
Certain equipment and materials that make your home eco-friendlier may be eligible for the Nonbusiness Energy Property Tax Credit if they meet the standards that the Department of Energy (DOE) has established. The Internal Revenue Service divides qualifying upgrades into the two following categories:
Qualified Energy-Efficiency Improvements
Energy-efficient windows: Replacing your old windows with energy-efficient ones, weatherstripping your existing windows, or installing window treatments can prevent conditioned air from escaping your home. This will reduce strain on your HVAC system and help keep your energy bills low. A maximum tax credit of $200 is available for energy-efficient windows.
Energy-efficient doors: Old exterior doors contribute significantly to air leakage, so it’s a good idea to replace them with new ones that come with weatherstripping. You can get up to $500 worth of tax credit for your new doors, excluding the cost of installation.
Energy-efficient skylights: Old skylights can make your home colder in winter and warmer in summer. New skylights, on the other hand, come with energy-efficient features such as insulated glazing and heat-absorbing tints to control temperature changes. Upgrading your skylights makes you eligible for a tax credit of up to $500, excluding installation.
Insulation: When your insulation becomes less effective over time, your HVAC unit has to work harder to keep your home comfortable, resulting in higher energy costs. A maximum tax credit of $500 is available to homeowners who replace old and ineffective insulation.
Metal and asphalt roofs: Metal and asphalt roofs can help reduce your energy consumption during summer because they have a reflective surface that causes heat to bounce off instead of being absorbed into your home. If you install metal or asphalt roofing, you can receive a tax credit of up to $500.
Residential Energy Property Costs
Central air conditioning: If your central air conditioning system is old, replacing it with an energy-efficient model can make your home more comfortable and increase your energy savings. Additionally, it qualifies you for a maximum tax credit of $300.
Advanced air circulating fans: Advanced circulating fans produce heat for your home by blowing cool air into your furnace and feeding the resultant warm air into your duct system. If you install these fans, you’ll be eligible for a credit of up to $50.
Biomass stoves: Biomass stoves generate heat through the combustion of organic materials such as biomass pellets and compressed wood. These materials burn cleanly for an efficient and eco-friendly source of heat. When you use biomass stoves, you can claim an energy tax credit of up to $300.
Air-source heat pumps: These types of heat pumps are energy-efficient appliances that use electricity to move heat from the outside to the inside for warmth and hot water. Switching to air-source heat pumps makes you eligible for a maximum credit of $300.
Gas furnaces and boilers: Gas furnaces and boilers use natural gas to heat your home and water, respectively. Although they aren’t eco-friendly, they enable you to obtain an energy tax credit of up to $150.
Gas and electric heat pump water heaters: Gas and electric heat pump water heaters transfer heat from one place to another to produce hot water. They use significantly less energy than traditional water heaters, so you can get a maximum tax credit of $300 if you install them.
Propane furnaces, boilers, and heat pump water heaters: These appliances use propane rather than natural gas or electricity to generate heat and hot water for your home. Since propane is a fossil fuel that is environmentally friendly, these appliances qualify for a tax credit of up to $150.
Residential Renewable Energy Tax Credit
According to the DOE, you’re eligible to claim the Residential Renewable Energy Tax Credit if you use a renewable energy source in your home. Qualifying energy sources include:
Solar energy generation systems: Solar energy generation systems such as solar panels and solar water heaters use power from the sun to produce electricity and heat water. They generate energy in a carbon-free way, making them beneficial to the environment. If you install any of these systems, you can claim a tax credit that amounts to 26% of the full cost, which includes the equipment and installation.
Wind energy generation systems: Residential wind turbines generate carbon-free electricity by using the power of the wind. They may cost tens of thousands of dollars, but they can help you save substantially on your utility bills over the long run. Installing one of these systems qualifies you for a credit equal to 26% of the total cost.
How To Make Your Home More Energy-Efficient
Tax credits only reduce the initial costs of the energy-efficient improvements you make to your home, but they don’t have an impact on your future energy costs. If you want to keep your utility bills low, you can do a number of things to increase the overall energy efficiency of your home, such as:
Closing shades, blinds, and drapes on the side of your home that faces the sun.
Using your ceiling fan.
Installing energy-efficient windows or adding tinting film or solar shades.
If you want to know your home’s current level of energy efficiency or need expert advice for reducing your energy consumption, feel free to speak with the knowledgeable and helpful team at Energy Diagnostics, Inc. Contact us today to learn more about our services.