The American Recovery and Reinvestment Ac t of 2009 ( i.e., the “Stimulus Bill” ) enables homeowners to apply 30% of the material cost of qualifying projects to a dollar-for-dollar reduction in their taxes, with a cap of $1500. Eligible products include: windows, doors, skylight windows, central air conditioners, furnaces, hot water heaters, metal roofs, stoves and advanced main air circulating fans.

Here are the requirements for tax credit eligibility:

1. Qualifying products must be purchased and installed between January 1, 2009 and December 31, 2010.
2. Products must be installed in taxpayer’s principal residence.
3. Products must comply with the new ETC-30 energy standards.
4. The lifetime cap for the credit is $1500 — you cannot take a $1200 credit for new windows and then later claim an additional $800 credit for a new air conditioner (NOTE: The 30% tax credit is not limited for certain renewable energy improvements such as solar power and water heating systems)
5. You must file a 1040 form to claim the credit (taxpayers filing a 1040EZ tax form are ineligible). Also, if your tax liability is zero for the current year, you can carry the credit amount forward to a year in which you do owe taxes, but you can never get back more in credits than the amount of your liability.

In applying for the credit, the following paperwork will be needed:

1. An invoice from your contractor breaking out the material cost portion of your project
2. A Manufacturer’s Certification Statement verifying that the product(s) installed comply with the new ETC-30 energy standards (NOTE: You will not be required to submit this with your tax return but will need it in the event you are audited)
3. IRS Form 5695 – Residential Energy Efficient Property Credit

Please understand that this is the best information available as of this writing and is subject to change. Taxpayers should check with the IRS regarding updates to the IRS interim guidance Notice 2006-26, and should consult with a professional tax advisor prior to filing their return.

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