USI Blog

How do I Apply for Federal Tax Credits?

Putting_money_into_a_piggybankApplying for federal tax credits for energy-saving home improvements is a simple process that can save you hundreds of dollars. Credits are available for a variety of home improvement projects, as well as for installing Energy Star appliances, but one of the most energy-efficient and cost-effective projects you can complete is replacing and/or adding to your home’s insulation.

How Much is the Federal Tax Credit?

The credit for upgrading or replacing the insulation in your existing primary residence is 10% of the purchase price up to a maximum of $500.00. This credit is for the purchase of materials only, not the cost of the installation, and can be claimed only after the product is fully installed and in use.

Remember that a tax credit reduces your tax liability, unlike a deduction, which lowers your taxable income. In practical terms, this means that a credit is available to you regardless of your level of income and will reduce the amount you owe by the qualifying amount, up to $500.00.

Additionally, you can save up to 20% on your heating and cooling bills annually; a savings that can potentially pay for your new insulation in just a few years.

How and When to Apply?

In order to receive your credit, you must file an IRS Form 1040 and Form 5695 when you file your yearly taxes. This form is simple to follow and will guide you in claiming the correct amount from your purchase. The total from Form 5695 will be entered on Line 52 of Form 1040. You do not have to itemize your deduction, but you may wish to in order to get the most benefit.

What Other Information do you Need?

Like any other credit you file, you must have appropriate documentation to support your claim, so be sure to keep receipts for your purchases. Almost any type of insulation that you choose will qualify for the credit, but be sure to follow the R-value recommendation for your demographic area.

The R-value is the measure of the insulation’s ability to resist heat. Energy Star provides a detailed map outlining these values in the United States, but you should also talk with your contractor to discuss your specific needs. You will also want to make sure that you caulk and/or use weather stripping around areas prone to leakage, like windows and doors.

Claiming your tax credit for energy efficiency is an easy process that brings significant reward. Not only will you save money, but your home will be cleaner and more comfortable. To learn more about the benefits of insulation, contact USI online to request a free quote. USI believes that excellence in every step of the process ensures timely completion and quality service, time after time.


Image via: