5 Ways to Take Advantage of the Federal Energy Tax Credit

In early January, President Obama signed the American Taxpayer Relief Act of 2012, which reinstated for 2012-2013 the Federal Tax Credit of up to $500 on select energy-efficient products.

As with all Federal tax legislation, it’s not always easy to know when the tax credit applies and how to take advantage of it. If you’ve been putting off an energy-saving improvement because of cost, getting educated about the Federal Energy Tax Credit could simplify your decision. Below we’ve listed a sampling of the types of upgrades that qualify for the credit, as well as important information and links for applying for the incentive.

New Windows and Doors

Approximately one-third of a home’s total heat loss usually occurs through windows and doors, according to the NRDC. Replacing older single-pane windows with double- or triple-pane new ones that exceed Energy Star specifications can be a smart investment. You do not have to replace all the windows/doors/skylights in your home to qualify for the tax credit. And it doesn’t need to be a replacement either – installing a new window where there wasn’t one previously (like in an addition) qualifies.


For optimal energy efficiency, your home should be properly insulated from the roof down to its foundation. If you live in an older house, or an apartment that suffers from cheap construction, poor insulation could be costing you a big chunk of change. Adding adequate insulation is one of the most cost-effective home improvements that you can make, and it’s not that hard to DIY. Typical bulk insulation products can qualify for the credit, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place. Products that air seal (reduce air leaks) like weather stripping and house wrap, can also qualify, as long as they come with a Manufacturers Certification Statement. Keep in mind that installation costs are not eligible for the credit.

Biomass Stoves

If you’ve been looking to move a little farther off the grid, a biomass stove is an eligible improvement that’s worth considering. Especially attractive for rural or remote homesteads, biomass stoves burn biomass fuel to heat a home or heat water. Biomass fuel includes agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues and fibers. Those with a thermal efficiency rating of at least 75 percent qualify for a $300 credit.

Air Conditioners/Heaters

We pay dearly to keep our homes toasty warm in winter and chilled in summer. But all of that climate control requires a huge amount of energy, especially if you’re using outdated or inefficient equipment. HVAC (heating, ventilation and air conditioning) equipment makes up a significant portion of the Federal Energy Tax Credit, with $50 – $300 available for particular upgrades. Eligible equipment includes heat pumps, which use electricity to move heat from a cool space into a warm one, making the cool space cooler and the warm space warmer (and vice versa in the summer), central air systems, in-floor radiant heating and certain furnaces.

Renewable Energy Systems

While new appliances are all well and good, the best way to conserve energy is to make it ourselves using renewable sources. As you might expect, home solar, residential wind and geothermal heat pumps lead the charge when it comes to government tax credits. Unlike other upgrades, which are usually limited by a modest credit amount, renewable energy systems are eligible for around 30 percent of total cost, with no upper limit.

Tips for claiming your Federal Energy Tax Credit:

  • You don’t to use a specific contractor, although they can be quite helpful in choosing equipment that meets the criteria for eligibility. However, if you’ve got the know-how DIY is totally acceptable
  • You do need to keep receipts and paperwork from manufacturer so that you can prove eligibility of a device or system.
  • Make sure you’ve reviewed and completed the required paperwork to recieve your credit in a timely fashion.

EnergyStar.gov has lots more information on what upgrades qualify for the credit and how to apply.


Related Reading:

How to Vanquish Costly Energy Vampires from your Home

Your DVR Wastes More Energy Than Your Refrigerator

Declare Your Independence From High Energy Bills


Image via Thinkstock

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Past Member
Past Member 2 months ago

I’m eager to find the valuable information and for me this is the right place to get the good stuff.building business credit fast

Marcel Elschot
Marcel Elschot2 years ago

Thanks for the article

Mary B.
Mary B.2 years ago

Tax credits are useless for low income people. We need real money in the form of grants so we can afford to upgrade our homes.The home weatherization program is good, but the waiting list is long and often takes 2 or3 years.So much more needs to be done to bring poor people into the 21st century.

Fred Hoekstra
Fred Hoekstra2 years ago

Thank you Beth, for Sharing this!

Sue H.
Sue H.2 years ago

Good to know information, thanks.

Sue Matheson
Sue Matheson2 years ago


Julie F.
Julie F.2 years ago


Vicky P.
Vicky P.2 years ago


Autumn S.
Autumn Away S.2 years ago

thank you

Debbie Williamson

Thank you. Very good information