Federal Tax Credits Available for Adding Insulation to Existing Homes

What is the energy efficiency tax credit worth?

Home owners are eligible for a tax credit of up to $1,500 for 30% of the costs of qualified energy efficiency improvements made to their homes.  Therefore, if a homeowner spends $1,000 on new qualifying insulation, they are eligible for a $300 Federal tax credit.  This is a more generous credit than the previous tax credit of up to $500 for 10% of the costs. 

Is there a specific time frame in which I need to make energy efficiency improvements in order to be eligible for the tax credit?

Consumers who want to take advantage of the Federal tax credits for their homes must install the products between January 1, 2010 and December 31, 2010.

How do I get a tax credit for insulation?

 The tax credit for existing homes requires that the building envelope component being renovated must meet the energy efficiency minimum standards outlined in the 2001 or 2004 International Energy Conservation Code (IECC).The envelope is defined as the area along the perimeter of the home that separates the living space from the outside.

This includes attics, foundation and exterior walls, basements and crawl spaces. Insulation is a key component of the home or building envelope. Other qualified envelope components include windows (limited to a maximum credit of $200), doors, skylights and air duct sealing. EPA’s ENERGY STAR Home Sealing Program offers consumers advice on how to improve their building envelope. Adding fiber glass or mineral wool insulation is one of the fastest and most effective ways to save energy in your home. Insulation and home sealing can save up to 20% on energy use according to the U.S.EPA.

Do I still get the tax credit if I hire a professional contractor to add insulation?

The IRS guidance states that only the cost of the insulation products is eligible for the tax credit, and installation fees are not eligible. That said, there are many good reasons to hire a contractor, such as installation of loose-fill insulation, to ensure proper installation and if you do not have the skills or interest to do the job yourself. Make sure the contractor gives you an itemized receipt that breaks out the cost of the insulation from the labor charge.

What paperwork will I need to produce at tax time in order to be eligible for the tax credit?

Check with the IRS for complete information. Generally, an itemized retail or contractor receipt showing the amount spent on insulation materials between January 1, 2010 and December 31, 2010, along with a certification document from the insulation manufacturer should meet the requirements.