Homeowners making improvements to their houses to save money on energy bills can take advantage of tax credits that will save even more. When President Obama signed into law the American Recovery and Reinvestment Act of 2009, also known as the “stimulus bill,” the act extended credits to homeowners who made improvements for energy efficiency.

The improvements must be “placed in service,” or ready and available for use, from January 2009 through Dec. 31, 2010. They must be for the taxpayer’s principal residence, except for geothermal heat pumps, solar water heaters, solar panels and small wind energy systems (where second homes and rentals qualify). Tax credits are available at 30 percent of the cost, with $1,500 as the maximum total amount that can be claimed in 2009 and 2010, except for those items listed above and fuel cells. These items are not subject to the cap, and are in effect until 2016.

Home improvements must have a Manufacturer Certification Statement to qualify, and homeowners need to save receipts and the certification statement for their records. Improvements made in 2009 will be claimed on 2009 taxes (filed by April 15, 2010) using IRS Tax Form 5695.

Qualified homebuilders building new homes can qualify for the tax credit for geothermal heat pumps, photovoltaics, solar water heaters, small wind-energy systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC or nonsolar water heaters.

There is no upper or lower limit on income for the credits; however they are “nonrefundable,” which means a tax filer can’t get more money back in tax credits than they pay in federal income taxes. Also, with multiple improvements, only a maximum of $1,500 over the two-year period of 2009-2010 is available.

“Basically, you can spend up to $5,000 during this two-year period on a single or multiple improvements, and get 30 percent or $1,500 back as a tax credit. If you get the entire $1,500 credit in 2009, then you can’t get anything additional in 2010,” according to the government’s Energy Star help line.

More