As of the 2018 tax year, many of the federal tax credits for upgrading to new, energy-efficient appliances have expired. In the past, you were able to collect federal tax credits for energy-efficient water heaters, air conditioners, boilers, furnaces and other in-home appliances. Now, the IRS provides these types of tax credits only for residential renewable energy products. According to Energy Star, these tax credits should remain available through December 31, 2021.
The tax credits may have expired, but in many cases it’s still a cost-effective solution to update your major in-home appliances. Depending on the age of your water heater, air conditioner or furnace, you could be wasting valuable dollars every month by powering old, inefficient appliances.
For tax year 2018, we’ll explain some of tax credits you can still qualify for if you decide to choose a renewable energy appliance for your home. We’ll also illustrate some of the cost savings you can expect if you choose to replace your old appliances with energy-efficient ones in 2019.
What appliances can I still get a tax credit for?
The U.S. government has restricted the federal tax credit to apply only to equipment that uses alternative energy. You can receive a 30% tax credit through the end of 2019. After 2019, the credit will gradually decrease until it disappears completely for the 2021 tax year. You can view the appliances available to receive the tax credit on IRS Form 5695. Examples that still qualify for the residential energy credit include:
Solar water heater. These water heaters convert power from the sun into an energy-efficient heat source for your water. In order to be eligible, the solar water heater must be installed at your primary residence, not a rental property. At least half of the energy generated by the water heater must come from the sun.
Geothermal heat pump. These energy-efficient home temperature regulation systems use an extensive system of pipes to heat or cool the air in your home by removing or distributing heat in the ground. If you’re considering installing a geothermal heat pump for the tax credit, it must be installed at your primary residence. It can be installed in a new or existing home. Geothermal heat pumps with the Energy Star symbol are eligible.
Small wind turbine. These residential-sized wind turbines convert wind energy into electricity for your home. In order to qualify, the turbine must be installed at your primary residence; the residence can be a new, existing, or second home. The turbine must have a nameplate capacity of no more than 100 kilowatts.
How do I file my tax rebate?
Filing for your tax rebate is simple, as long as you meet the requirements. According to TurboTax, “To claim the credit, you’ll need IRS Form 5695. Work out the credit amount on that form, then enter it on your 1040. You should keep your receipt for the appliance as well as the Manufacturer’s Certification Statement, so you can prove your claim if the IRS ever conducts an audit.”
Will I save money by upgrading to energy-efficient appliances?
If you’re looking for an appliance upgrade, you don’t need a tax credit to see the cost savings. If any of your appliances have been around for more than 10 years, you can expect to see considerable energy savings when you upgrade to a newer model. For example, according to Energy Star, certified gas storage water heaters are, “about eight percent more efficient than a standard model.” Energy Star certified central air conditioners not only have higher seasonal energy efficiency ratio (SEER) and energy efficiency ratio (EER) ratings but also use about 8 percent less energy than conventional new models.
In total, Energy Star reports that, “By choosing Energy Star, a typical household can save about $575 on their energy bills and still enjoy the quality and performance they expect.”
Are you in the market to upgrade a major home appliance?
Althoff Industries specializes in recommending and replacing furnaces, boilers, air conditioners and more. Contact us today at (815) 455-7000, and we’ll help you get the process started.
Disclaimer: Althoff Industries does not provide tax, legal or accounting services. This article has been prepared for informational purposes only.