The tax bill signed into law last week extended the “residential energy credit” that provides a tax credit for purchases of certain energy efficient doors, windows, insulation, furnaces, air conditioning systems, certain types of water heaters, and even certain types of roofs. 

The credit had been set to expire on December 31, 2010, but has been extended through 2011.  There’s a catch though — the amount of available credit has decreased, and people who have taken the credit in the past may not be able to take it at all in 2011.

2010 Rules vs. 2011 Rules

  • 2010:  The credit is 30% of the purchase price.  The maximum amount of residential energy credit that you can take in total from 2005-2010 is limited to $1,500 (the credit has existed in several forms since 2005).
  • 2011:  The credit is 10% of the purchase price, and the maximum amount of residential energy credit that you can take in total from 2005-2011 is limited to $500.

This means if you have claimed $500 or more in residential energy credits since 2005, the credit is not available to you in 2011.

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