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Home Energy Credits

Tax Credit for Residential Energy Improvements - A reduced credit for home energy-savings improvements is available through 2013. The credit generally equals 10% of a homeowner’s cost of eligible energy-saving improvements, up to a maximum lifetime tax credit of $500. The cost of certain high-efficiency heating and air conditioning systems, water heaters, and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation, and certain roofs also qualify for the credit, though the cost of installing these items is not included.

Tax Credit for Residential Energy Improvements – Energy property improvements to a principal residence located in the United States and placed in service through 2013 qualify for a credit of 10% of the cost of qualified improvements. The maximum lifetime credit allowed is $500. Thus for 2013, if the total of nonbusiness energy property credits taken since 2006 is more than $500, no credit is allowed in 2013. Some of the energy property categories have lower limits, such as $200 for exterior windows and skylights.

No credit is allowed for amounts paid or incurred for onsite preparation, assembly, or original installation of the component. The improvement’s original use must commence with the taxpayer, and the improvement must reasonably be expected to remain in use for at least five years. Credit generally applies to the following:
  • Qualified advanced main air circulating fan (used in a natural gas, propane, or oil furnace);
  • Qualified energy-efficient heat pumps;
  • Qualified energy-efficient water heaters;
  • Qualified energy-efficient central air conditioners;
  • Qualifying insulation;
  • Qualified exterior windows, including skylights;
  • Qualified exterior doors;
  • Qualified metal roofs coated with heat-reduction pigments; and
  • Qualified asphalt roofing with appropriate cooling granules.
Tax Credit for Residential Energy Efficient Property (REEP credit) – This credit is available for years 2009 through 2016. The installation must be on the taxpayer’s main or second home located in the United States. A 30% credit with no maximums (except as noted) applies to the following items:
  • Qualified solar water heaters;
  • Residential solar electric systems;
  • Fuel cell equipment – with a maximum credit of $500 for each half-kilowatt of capacity;
  • Qualified wind energy equipment; and
  • Qualified geothermal energy equipment
Labor costs for onsite installation and for piping and wiring connections are qualifying costs for these credits. However, the credits do not apply to equipment used to heat swimming pools or hot tubs.

Credit limitations – Although these credits can be used to offset both the regular tax and AMT, they are nonrefundable personal credits that can only reduce a taxpayer’s tax to zero; any remaining balance is not refundable. If the amount of the credit for the residential energy efficient property credit (REEP - i.e., the credit for residential solar and fuel cell equipment and wind/geothermal energy equipment) exceeds the taxpayer’s tax after subtracting other nonrefundable personal credits, the excess may be carried forward to the next tax year and added to the credit allowable for that year.

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    North Haledon, NJ 07508