Tip

09/19/13

Can I Get a Tax Credit for That?

Updated: August 7, 2013

No one likes filling out their taxes. But, for consumers and businesses making energy-efficient choices, tax season might help you keep a little extra cash in your wallet. In addition to lowering your energy bills at home and on the road, energy-efficient products eligible for the federal tax credits actually lower the amount of federal income taxes that you must pay Uncle Sam.

More information on home and vehicle tax credits

More information on commercial and manufacturing tax incentives

You might be eligible for a federal income tax credit if...

  • You've purchased a plug-in hybrid or electric vehicle.
  • You've made certain energy efficiency upgrades in your home.
  • You manufacture efficient appliances.
  • You are a builder of efficient homes.

Commercial building owners who implement certain energy efficiency upgrades are eligible for a federal tax deduction.

What is a tax credit?

You don’t receive an income tax credit when you buy the product, like an instant rebate. Instead, you claim the credit on your federal income tax form at the end of the year. The credit will increase the tax refund you receive or decrease the amount you owe the government.

What's the difference between a credit and a deduction?

In general, a tax credit is more valuable than a tax deduction of the same amount. A tax credit generally reduces the tax you pay, dollar-for-dollar. Tax deductions – such as those for home mortgages and charitable giving – lower your taxable income by a percentage of the amount deducted. If you are in the 39.6 percent tax bracket, the income tax you pay is reduced by 39.6 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit.

What about other incentives?

In addition to the federal tax credits, consumers in some areas of the country also will be eligible for utility, state, or local rebates and tax incentives for homes, vehicles, and equipment. Check out the DSIRE database of incentives or contact your state energy office or local utility.

Which year's credits do I claim?

The credit value and technical criteria for the home improvement credits depend on when that improvement was installed. If you purchased a product in 2012, but did not install it until 2013, the 2013 criteria apply.

Where do I find these credits in the tax code?

  • Vehicle credits: Electric vehicles and plug-in hybrids are in section 30D, the "new qualified plug-in electric drive motor vehicles" credit.
  • Home improvements credits: Formally called the "nonbusiness energy property" credit, they are in section 25C of the tax code.
  • Geothermal heat pump, solar equipment, and fuel cells: The "residential energy efficient property" credit is insection 25D of the tax code.
  • Commercial buildings deduction: Located in section 179D of the tax code.
  • Appliance manufacturers' credits: The "energy efficient appliance credit" is located in section 45M of the tax code.
  • New homes builders' credit: Formally called the "new energy efficient homes credit," it is in section 45L of the tax code.