Top US Home Heating Tax Credits


Citizens of the U.S. who are planning summer home renovations might be surprised to learn they are eligible for generous home heating tax credits if they invest in alternative home heating products or insulation this year. In addition to generous federal energy tax credits, many states, counties, and municipalities now offer subsidies for making major alternative energy upgrades like installing a wind generator, installing solar hot water, or installing solar roof panels.

Unlike tax deductions, U.S. home heating tax credits are subtracted directly from the dollar amount of taxes owed, not from taxable income. Some of these credits are so substantial they can wipe out a tax debt fast. The tax credits are non-refundable credits however; meaning that once a tax debt hits zero, no money will be refunded even if some of the credit still remains.

Some of the best alternative home heating tax credits include:

30% of the cost (up to $1500) or biomass stoves; heating, ventilating and air-conditioning upgrades; non-solar water heaters, insulation, and roofing.
30% of the cost (with NO upper limit) of geothermal heat pumps, small wind turbines, and solar energy systems.

30% of the cost, up to $500 per .5 kW of power capacity for fuel cells to store the energy generated by small wind turbines.

To claim these alternative home heating tax credits, taxpayers must live in the home as their principle residence and must attach IRS for 5695 to their 2010 income tax 1040 form. Homeowners are limited to $1500 in energy tax credits every two years, which works out to $5000 total cost for alternative home heating or energy products every two years. If the entire $1500 credit is claimed in 2010, for example, the homeowner can’t take another energy tax credit in 2011.

This is a limit worth knowing. Multiple upgrades can be made substantially less expensive by spacing improvements so as to always take advantage of the available tax credits. In short, it is best not to greatly exceed $5,000 in improvements every two years for maximum federal support.

Subsidies to help homeowners finance solar and wind energy installations are generally available at the state or local level and vary by region. For example, Ontario is just now beginning to offer subsidies to homeowners who generate their own electricity, and the state of Ohio in the U.S. is beginning an initiative to subsidize solar hot water and the individual level. In the state of Michigan, subsidizes for wind power are offered at the county and municipal level and vary widely, so how much is available in subsidies depends on where a home is located.

To find subsidies that may be available in any given area, start by checking state, country, and municipal websites for that locale. Often manufacturers and installation firms are aware of state and local subsidies and will assist a homeowner in applying for them, but doing one’s own research is a good idea, since not all merchants are created equal, and homeowners might want to price shop without pressure from a manufacturer who is assisting with a subsidy application.

Finally, before installing any alterative home heating or energy systems or products make sure to review local ordinances and property tax structures. In some parts of the country, frustrating as it may be, subsidies are available but zoning laws and property tax structures are prohibitive. Over time, as alternative home heating and energy systems become more popular, these confusing conflicts are expected to be mitigated and the road to energy independence should become a bit less bumpy.

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