From the Stimulus Bill we are led to the Internal Revenue Service's Tax Code section 25. All this ultimately means that the Internal Revenue Service (IRS) is the distributor of the reimbursement funds. You may have already heard a 30% credit up to a maximum allowable $1500 credit will be available to taxpayers for the 2009 and 2010 tax filing seasons.



The residential energy property credit has a wider range of applications than that offered in 2007. The list includes;

Electric heat pumps

Central Air conditioning

Water heaters

Wood Stoves

Oil Furnaces

Hot Water Boilers

Qualified Natural Gas Furnace

Qualified Natural Gas Hot Water Boiler

Qualified Propane Furnace

Qualified Propane Hot Water Boiler

Qualified Oil Furnace

Qualified Oil Hot Water Boiler

Exterior Doors

Exterior Windows

Exterior Skylights

Insulation

This wider range of application comes with the price of higher energy efficiency standards. As of April 10, 2009, these higher standards were not yet published by the IRS, but consumers can still take credit with the existing standards. Details on the current standards and those cited by the IRS can be found at Solar: Midnight Oil.

How exactly can you save money? First, you have to be a taxpayer since the credits will only be realized on your income tax forms. Second, you do have to spend money to save money. This spending is in line with the stimulating the economy but in this case it is a win-win situation. Third, you have to have a need to actually make the change. For example, do you need new windows? Are the seals broken; are the double paned, ore there gaps in the frames? Are your external doors so warped you can see daylight through the gaps? How old is your hot water heater, is it up to the current energy efficiency standards? How old is you heat pump, is it up to the current efficiency standards? How much insulation do you have, how much insulation do you need? Fourth, the property has to have been placed in service after the date of the enactment of this ACT.

The following table demonstrates the savings you can appreciate if you install any of the items listed above in your home in 2009 or 2010. The table is using the profile of taxpayers filing jointly under the 2008 Tax Tables. The table is also assuming tax credits will be applied similar to that of 2007, where the credit was applied after the tax from the tax table was identified. If you are married and not filing jointly, or are single there is still a significant realized savings.

For a $5000 expenditure, with a $1500 tax credit, the tax credit savings might look like this:

Taxable Income

Tax From Table

Less $1500 Credit Allowed

Equates to Taxable Income

Difference in Taxable Incomes

Investment Cost

Realized Savings



$80,000

$12,694

$11,194

$74,000

$6,000

$5,000

$1,000

$70,000

$10,194

$8,694

$63,300

$6,700

$5,000

$1,700

$60,000

$8,201

$6,701

$50,000

$10,000

$5,000

$5,000

$50,000

$6,701

$5,201

$40,000

$10,000

$5,000

$5,000

$40,000

$5,201

$3,701

$30,000

$10,000

$5,000

$5,000

$30,000

$3,701

$2,201

$20,000

$10,000

$5,000

$5,000

Note: 2008 Tax Tables were used and assumed tax credit application similar to IRS form 5695 from 2007

For a $333 expenditure, the tax credit savings might look like this:

Taxable Income

Tax From Table

Less $100 Credit Allowed

Equates to Taxable Income

Difference in Taxable Incomes

Investment Cost

Realized Savings



$80,000

$12,694

$12,594

$79,600

$400

$333

$67

$70,000

$10,194

$10,094

$69,600

$400

$333

$67

$60,000

$8,201

$8,101

$59,350

$650

$333

$317

$50,000

$6,701

$6,601

$49,350

$650

$333

$317

$40,000

$5,201

$5,101

$39,350

$650

$333

$317

$30,000

$3,701

$3,601

$29,350

$650

$333

$317

Note: 2008 Tax Tables were used and assumed tax credit application similar to IRS form 5695 from 2007

See more on how the Residential Energy Property Credit (section 1121) portion of the Stimulus Bill will save you money at Solar: Midnight Oil.

About the author: Educating and motivating people to be responsible financially and environmentally are some of the goals of S. J. Watson. She believes in promoting things that will help people's quality of life. This interest is demonstrated in her involvement in Solar: Midnight Oil, which promotes not only solar energy, but also solar lighting, and alternative energy.

Tags: Stimulus bill, Energy tax credits, stimulus package tax credits, American Recovery and Reinvestment Tax Act of 2009,