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Qualifying for Energy Star Tax Credits

written by: Gwen Hagaman•edited by: Michele McDonough•updated: 11/28/2010

An Energy Star label does not guarantee a tax credit or a rebate. It does guarantee a product will cost less to operate, because it makes efficient use of energy. If you want a tax credit, or tax rebate, check with the IRS to see if the product qualifies before you make a purchase. Here's how.

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    What is Energy Star?

    “Energy Star” is a labeling program started by the U.S. Environmental Protection Agency (EPA) in 1992. Their goal was to encourage the use of energy efficient products by providing relevant information to consumers, much like nutrition labels we find on food products. They started by labeling computers, monitors and peripheral devices. By 1995 the program had expanded to include office equipment and residential heating and cooling equipment.

    Manufacturers submit their products to certified third party testing facilities. Products that meet or exceed the efficiency levels established by the EPA receive the Energy Star rating. Not only can the manufacturers advertise their products as Energy Star qualified, they are able to provide actual performance statistics to consumers.

    A major expansion of the program occurred in 1996, when the U.S. Department of Energy (DOE) joined as a partner. Products are tested and labeled in categories including major appliances, office equipment, lighting, home electronics, and more. Using the information provided by the Energy Star program, people have increased the use of efficiency innovations, such as long-life fluorescent lighting, power management systems for office equipment, and low standby energy features.

    Now the EPA and DOE are providing incentives for consumers to put even more energy efficient products into use in their homes. You can benefit by filing an energy star tax credit form along with your 2010 income tax return.

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    Do Energy Star Tax Credits Apply to Computer Equipment?

    Energy Star tax incentives don't really focus on computer equipment, but rather on the basic systems to run a residence, including new appliances, HVAC upggrades and weatherproofing. The tax credit only applies to residences - it's not available for businesses such as computer centers.

    The statistics provided by Energy Star labeling are helpful in selecting computer equipment with green benefits. Products that qualify for Energy Star labeling provide efficient use of energy and cost savings for their owners.

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    Federal Tax Credits

    To receive credit on your federal income tax return, file an Energy Star tax credit form 5695, which is available on the Internal Revenue Service (IRS) website. The form includes directions and rules about what qualifies. Be sure to save your purchase receipts and the Manufacturer Certification Statement with your tax records.

    There are three basic groups of tax credits. The first is for existing homes which are primary residences (new construction and rentals do not qualify) where the new products are installed before the end of 2010. In this category people can receive a credit of 30 percent of the cost of energy efficient appliances, up to $1,500 for qualified: Biomass stoves, Heating, Ventilating, Air Conditioning (HVAC) systems, Insulation, Roofs (Metal and Asphalt), Water Heaters (Non-solar), and Windows and Doors (Exterior).

    The second group is for major systems in primary residences or second homes (rentals do not qualify) where the new products are put into use before the end of 2016. Also a credit of 30 percent of the cost, this group has no limit. The following types of products qualify: Geothermal heat pumps, Small wind turbines (residential), and Solar energy systems.

    The last program only addresses fuel cells (residential fuel cell and microturbine systems) put into service before the end of 2016. Existing homes and new construction which are primary residences qualify (rentals and second homes do not qualify). The fuel cell tax credit is 30 percent of cost, up to $500 per .5 kW of the system’s power capacity.

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    State Tax Rebates

    The American Recovery and Reinvestment Act of 2009 provided $300 million for rebates to consumers who replace appliances with new Energy Star products. Each of the 56 states, territories and DC have their own set of rules about who and what qualifies and the time periods that are covered.

    The amount of rebates are generally between $50 and $500. To find out the details of the rebate program where you live, visit the DOE Energy Savers website. Many of the states have already distributed the money for their rebates and closed their programs.