Home > Personal Finance > 5 Home Upgrades That Can Lower Your Tax Bill

Comments 0 Comments

Energy-efficient products might cost more than other models, but they essentially pay for themselves in reduced home energy costs, according to the U.S. Environmental Protection Agency.

Federal income tax credits can add to homeowners’ savings. Credits for five types of alternative-energy systems, like solar water heaters, are available through the new year.

That means taxpayers who purchase one of these systems this year or next year can apply the credit to their 2015 or 2016 personal income tax bill from the Internal Revenue Service — depending on when the taxpayer incurred the qualifying expense. This Residential Renewable Energy Tax Credit, as it’s technically known, expires Dec. 31, 2016.

As Money Talks News founder Stacy Johnson explains, a tax credit is even better than a tax deduction: “A deduction just lowers your taxable income, but a credit? That lowers your tax bill. It’s like money in the bank.”

The Residential Renewable Energy Tax Credit is worth up to 30% of the expense of an alternative-energy system, including installation and labor costs.

To be eligible for the credit, taxpayers must purchase the system for their primary home, which must be located in the U.S. and owned by the taxpayer. Second homes also are eligible for some credits. Rental properties do not qualify for this tax credit. Taxpayers must also file a Form 5695 with their tax return.

1. Solar Electric Property Costs

  • System type: Solar panels, also known as photovoltaic systems (which capture light energy from the sun and convert it directly into electricity).
  • System requirements: Must provide electricity for the home, rather than for swimming pools or hot tubs, and must meet applicable fire and electrical code requirements.
  • Qualifying property types: Primary home or second home.
  • Maximum expense amount that can be claimed: No upper limit.

2. Solar Water Heating Property Costs

  • System type: Solar water heaters (which use the sun’s thermal energy to heat water).
  • System requirements: Must heat water for the home, rather than for swimming pools or hot tubs, and must meet applicable fire and electrical code requirements. Must be certified by the Solar Rating and Certification Corporation or a comparable entity endorsed by the applicable state government.
  • Qualifying property types: Primary home or second home that generates at least half of its energy from the sun.
  • Maximum expense amount that can be claimed: No upper limit.

3. Small Wind Energy Property Costs

  • System type: Small wind turbines.
  • System requirements: Must have a nameplate capacity of no more than 100 kilowatts.
  • Qualifying property types: Primary home or second home.
  • Maximum expense amount that can be claimed: No upper limit.

4. Geothermal Heat Pump Property Costs

  • System type: Geothermal heat pumps (which use the earth’s natural heat instead of outside air to provide heating, air conditioning and often hot water).
  • System requirements: Must meet federal Energy Star criteria that are in effect at the time the system is purchased.
  • Qualifying property types: Primary home or second home.
  • Maximum expense amount that can be claimed: No upper limit.

5. Fuel Cell Property Costs

  • System type: Fuel cells, microturbines.
  • System requirements: Must have an efficiency of at least 30% and a capacity of at least 0.5 kW.
  • Qualifying property types: Primary home only.
  • Maximum expense amount that can be claimed: Up to $500 per 0.5 kW of power capacity.

For more energy-efficient tips, check out “5 Simple Rules for Choosing the Right Money-Saving LED Bulbs.”

More From Money Talks News:

Image: Creatas

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team