Tax Credit Upgrade

Year-end Energy Upgrades for Tax Credit

There’s something to be said for year-end tax credits. As the end of the year approaches, taxpayers are often bombarded with requests and advice for sneaking in some last-minute credits that can work to your advantage when April 15th hits. Energy upgrades are no different. If you’ve looked into any kind of energy or green upgrades for your home or business, you probably know that most of them are slated to expire before too long anyway, and each state has different options on top of the federal ones in place. It’s not too late to get in some energy upgrades that will benefit your home or business and your 2018 tax return.

Why Upgrade for Tax Credits?

When you upgrade and apply for a tax credit, the credit comes straight off of your tax bill dollar for dollar. That means that the amount you receive for an upgrade is the same amount taken off your taxes owed for that year. So not only does it constitute more money in your pocket, you reap long-term benefits and savings on your energy bills and efficiency for the future.

When you upgrade to solar, wind, or geothermal systems in your principal residence (and even in a second home), you qualify to receive a credit that equals 30% of the cost of the system and installation. You can upgrade fuel cell equipment, but the credit for that only applies to your principal residence, not a secondary. Regardless, a 30% credit is a pretty good chunk to get back on your taxes—and to make it even more enticing, there’s no cap on the amount of credit you can receive for solar/wind/geothermal systems. Fuel cell credits max out at $1,000 per kilowatt. Still an excellent benefit to a system upgrade.

Two Types of Credits

There are two categories of energy tax credits available for eligible upgrades: the Residential Energy Efficiency Property Credit and the Nonbusiness Energy Property Credit. The Residential Property Credits include upgrading systems such as solar, wind, geothermal heat pumps, and fuel cells. In order to qualify for the Nonbusiness Energy Property Credit, the upgraded equipment must qualify for efficiency standards put in place by the Department of Energy. While the manufacturer can tell you whether their product will qualify, there are two types of upgrades that fall under the Nonbusiness Credit: qualified energy efficiency improvements and residential energy property costs.

Qualified Energy Efficiency Improvements:

  •       Exterior doors
  •       Exterior windows (max $200)/skylights
  •       Use house heating products and installation from wood heater burnie
  •       Home Insulation
  •       Some roofing materials

Residential Energy Property Costs:

  •        Central air conditioners
  •        Natural gas, propane, or oil furnaces/boilers (max $150)
  •        Natural gas, propane, or oil water heater
  •        Electric heat pumps
  •        Electric heat pump water heaters
  •        Biomass-fueled stoves
  •        Circulating fans for natural gas, propane, or oil furnaces (max $50)

While you are allowed to claim for tax credits 10% of the total cost of qualified improvements and 100% of residential energy property costs, the credit maxes out at $500 for all years from 2006 to the present—combined. Still, these credits are nothing to sneeze at, and if you have an opportunity to save money and receive tax benefits, why not?

Solar Energy Systems

While many of the federal tax credits for energy upgrades expired at the end of 2016, credits for solar upgrades are still in place and will remain through December 2021. This means that you can upgrade your home or business to solar water heaters and solar panels and receive credits on your federal tax return through tax year 2021, so that one will be around for a few more years. However, there’s no reason not to take advantage of it for the current year and receive the tax benefits sooner rather than later! You never know what new laws will be enacted in the ensuing years, and the sooner you upgrade, the sooner you can receive the credits and benefits—the better for you all around. The numbers decrease slightly between 2019 and 2021, but the credit will still be available through then.

State Incentives

Each state has separate credits you can receive for energy upgrades, so you’ll want to look into what your state offers. Most states offer at least a few, such as:

  •        Geothermal heat pumps
  •        Wind installations
  •        Insulation
  •        Wood stove conversions
  •        Sales tax on energy-efficient appliances
  •        Home energy audits

While each of these upgrades is state-specific, many of them are offered in multiple states—but also, state credits may expire sooner than federal. You will want to check on that as well when looking into information on your state, because several states have had credits expire in the last few years. You can check a state-by-state database at to see precisely which credits are available to you in your location. If you are considering an energy upgrade, why not get it started now before the year runs out?

With all the state and federal tax credits, deadlines, and opportunities out there, your best bet would be to check before installing just to be sure you don’t install an upgrade with a credit that’s expired. With the constant fluctuations and decisions in Congress, the federal laws can change frequently, so you’ll want to be one hundred percent sure that you’ll get the credit for 2017 if you’re upgrading before the end of the year.

While the year is drawing to a close, that doesn’t mean time is running out. There’s no time like the present to get set up with energy efficiency upgrades that will help you out in numerous ways—and obviously, saving money is never a bad thing. Why not see which upgrades you can sneak in before the end of the year to save on your taxes next April? You’ll be glad you did.