When it comes to conserving energy and reducing your utility bills, nothing can give you a return on investment like new insulation – especially if your home was very poorly insulated before. But insulation has other benefits as well – and we’re not talking about acting as a sound barrier and preventing moisture and mold growth within the home. No, we’re talking about the tax credit that homeowners can get form new insulation.
That’s right, because the installation of new insulation is one of the most energy-efficient things you can do within your home, you’re eligible for a nice tax credit. Specifically, the tax credit is available for any energy improvement, of which insulation is included. You’re allowed to claim up to 10 percent of the cost of your insulation project, however this amount is capped at $500 and doesn’t include installation costs. Being that attic insulation can cost up to a few thousand dollars and subsequent insulation of exterior walls can also add to the total bill, it’s a good bet to assume that if new installation was in your cards in the past calendar year, you’re good to receive the tax credit.
Keep in mind that tax credits work differently than tax deductions. While deductions help to lower your overall taxable income, tax credits are either directly subtracted from what you owe to Uncle Sam or added to what your tax refund is. So say you’re due a refund of $3,400 upon completing your tax return and then tack on a $500 energy efficiency credit for new insulation. Your new refund would become $3,900.
So How Do I Get My Tax Credit?
Thankfully, getting your energy efficiency tax credit isn’t very difficult – just be sure to hang on to your insulation work order so that you can prove it to the IRS that you’re deserving. Furthermore, the work needs to have been performed on your principle residence to qualify, so secondary homes unfortunately won’t count for this. If you’ve got the necessary receipts and meet the criteria, then all you need to do is fill out IRS Form 5695 with your year’s income taxes.
Pretty simple, right?
It’s worth noting that a variety of other energy efficiency products and home improvements also qualify for this tax credit. These include the likes of:
- Weather stripping.
- Canned spray foam.
- Air-sealing caulk.
- House wrap.
For more specific information, be sure to swing on over to the Energy Star website.
Like we said in the opening, taking the necessary measures to make your home more energy efficient isn’t just great for reducing your carbon footprint, but for reducing your utilities bill as well. And insulation is the single-handed best way to accomplish this. New insulation costs can add up, and while the installation is going to pay for itself in time, the tax credit can help sweeten the deal as well.