Tax Credits for Energy Star Appliances

Tax Credits for Energy Star Appliances
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Before January 1, 2011, taxpayers were able to claim tax credit for purchasing certain energy-efficient appliances certified as "Energy Star" items by the Department of Energy. As part of the American Recovery and Reinvestment Act, many of the allowable tax credits for appliances ended when the legislation ended. On December 17, 2010, Congress and President Obama jointly enacted the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, extending the tax credits for some energy efficient purchases but at reduced amounts.

Pre-2011 Appliance Credits

Under the prior legislation, taxpayers could purchase energy efficient home appliances and claim credits limited to $1,500. Taxpayers could aggregate multiple purchases for qualified appliances over 2009 and 2010. Thus, taxpayers who purchased $1,000 of energy efficient items in 2009 could receive another $500 credit in 2010, as long as taxpayers purchased and installed their appliances between January 1, 2009, and December 31, 2010.

Post-2010 Purchases

After the 2010 tax year, the IRS eliminated many of the allowable appliance credits. Under both acts, the IRS limited the purchases to products placed in the taxpayer’s principal residence. Taxpayers may not claim the tax credits for appliances purchased as investments or vacation homes. Additionally, the IRS restricts the appliance credits to existing homes and disallows credits for appliance purchases placed in newly constructed homes.

2009 and 2010 Appliances

Before the previous legislation ended, taxpayers could purchase a wide variety of appliances. Included within the list of allowable purchases were air conditioners, freezers, refrigerators, water coolers, dish washing machines, purifiers and air dehumidifiers and heaters. As long as the products bore the "Energy Star" certification, then taxpayers could claim the energy credits for their purchases. Taxpayers who qualified for these credits may use IRS Form 5695 on their 2011 tax returns.

2011 Appliances

For the 2010 tax year, taxpayers who purchase energy efficient products may claim the credit. Qualified appliances include air conditioners, heat pumps, water heaters, boilers, furnaces and fans. There is currently a $500 lifetime limit, and taxpayers who received at least $500 in past tax credits may not claim credits for new purchases in 2011. The credit amount is reduced to $50 for circulating fans, and $300 for the other appliances. Taxpayers must place the appliances for use in service between January 1, 2011, and December 31, 2011. Taxpayers may use IRS Form 5695 to claim their credits.