Tankless Water Heater Tax Credit 2011

Tankless Water Heater Tax Credit 2011

Contents:

  1. What do I need to qualify for a 2011 tankless water heater tax credit?
  2. What is the maximum tax credit allowed?
  3. How to claim your tankless water heater tax credit?
  4. Are there tankless water heater rebates?

You may qualify for a $300 tax credit for instantaneous water heaters that meet specific requirements.  The Energy Star program was set up to help manufacturers produce energy efficient appliances.  We are limiting our information as it pertains to tankless water heaters,not other energy star approved appliances.

We called Energy Star,the IRS,and  browsed their websites to obtain the following information.   Please verify all information before purchasing as we can not guarantee that this information will be updated continuously.  The information here is as accurate as humanly possible as of May 16,2011.

The 2011 tax credit will provide tax credits for the following:

  • Gas Tankless Water Heaters
  • Propane Tankless Water Heaters
  • 5Electric Tankless Water Heaters DO NOT qualify for the 2011 Federal Tax Credits.

 

1.  What do I need to qualify for a 2011 tankless water heater tax credit?

The demand water heater must be  “placed in service” in 2011.  This means the product has been installed and is ready to use,not when you purchased the device.   Use  IRS Form 5695 and submit this with your tax form before the April 15,2012 deadline.  You can claim your energy tax credit on line 52 of the 1040 tax form1.

NOTE: There have been changes for the 2011 5695 form which has not been released yet by the IRS.   Expect it to be available by the end of this year.  At the time of this writing (May 15,2011) only the 2010 version is available and does not accurately reflect the significant changes made for 2011.

Summary:

  • You will receive $300,regardless of the purchase price or installation costs
  • This credit will expire 12 /31 / 2011
  • Must be installed and ready to use by the end of 2011
  • Must use the Federal Energy Tax Credit Form 5695
  • File your claim before April 15,2012
  • Applies only to the principal residence2 (can be a houseboat,mobile home,condominium,etc.) you currently reside in,not a new construction or rental
  • Purchase receipts and certification statements are not necessary  but keep them in case of a tax audit

2.  What is the maximum tax credit allowed?

The lifetime limit for this tax credit is now $500 as of January 1,20113.  If you’ve claimed any energy efficiency tax credits from 2006-2010,then that amount would be part of your total lifetime tax credit.  For example,if you’ve already claimed $600 worth of tax credits between 2006-2010,you would no longer qualify for any more energy tax credits in 2011.  If for example,your total tax claim was $200 prior to 2011,then you would be eligible for only $300 worth of tax credits for 2011.  The $500 tax credit can apply to one or more products,but the total  credits of all products can not exceed $500  for your lifetime.

NOTE: This $500 tax credit limit does not apply to all categories of energy efficient products.  For other products,the limit may be much higher.  Please check Energy Star’s website for further information.

3.  How to Claim Your Tankless Water Heater Tax Credit?

Step 1. Make sure the natural gas  or propane tankless water heater has an

  • Energy Factor (EF)  ≥ .82

OR

  • Thermal Efficiency (TE) of  ≥ 90%

Step 2. To verify that a specific model is certified,email or call the tankless water heater manufacturer and ask if they can send you a copy of  a Manufacturer’s Certification Statement 4 This is simply a signed statement  from the manufacturer saying that the product  is eligible for the tax credit.  You may wish to go to Energy Star’s listing of qualified whole house gas tankless water heaters.   This listing only identifies Energy Efficient models; being listed does necessarily mean that model qualifies for the 2011 Tax Credit,but in most cases heaters listed there also qualify,especially if it meets the EF and TE requirement above.  The sure fire way to identify if a model qualifies for the Federal Tax Credit is to ask the manufacturer for a Certification Statement.

Step 3. Fill out  IRS Form 5695,and submit it by April 2012.  On the 1040 tax form,you would fill out line 52 for the energy tax credit.  You can download the form at the IRS website.   In the search box type in ”2011 5695 ”and make sure the results are for 2011 not 2010 or prior years.

NOTE:While you are not required to submit your receipts and the Manufacturer’s Certification Statement,you should keep them in case the IRS decides to audit you.

4.  Are there tankless water heater rebates?

Your state may have a  tankless water heater rebate or Energy Star Rebates.

 

For Further Information:

We’ve found that calling the Energy Star hotline is your best bet for getting useful information on the 2011 Tax Credit.  The IRS has the latest information concerning the Tax Relief,Unemployment Insurance Reauthorization,and Job Creation Act of 2010 law  which was extends the energy efficiency Tax Credit to 2011,but has yet to update those changes in IRS form 5965.  When we phoned the IRS,the first person we talked to was not familiar with the details,and we were transferred to a specialist who read and examined the changes  to the 2011 Tax Credit laws  and then plugged in the numbers onto the existing 5965 IRS form.  While somewhat helpful,we’d rather have an updated 5965 form.

ENERGY STAR:

  • Email:hotline@energystar.gov   (If your questions are too long,they will usually reply by asking you to call. )
  • Phone:(888) STAR-YES / (888-782-7937)  (9:00 am –5:00 pm Eastern time)

IRS:

  • Phone:( 800 ) 829 –1040    and press  0


References:

  1. “Is there a tax credit for gas,oil,or propane water heaters?”EnergyStar. May 16,2011. http://energystar.supportportal.com/ics/support/KBAnswer.asp?questionID=19319
  2. “What is a principal residence?”EnergyStar. May 14,2011. http://energystar.supportportal.com/ics/support/KBAnswer.asp?questionID=22032
  3. “What is the maximum tax credit I can get for the energy efficient home improvements?”EnergyStar. May 16,2011. http://energystar.supportportal.com/ics/support/KBAnswer.asp?questionID=19174
  4. “What is a Manufacturer’s Certification Statement?”EnergyStar. May 16,2011. http://energystar.supportportal.com/ics/support/KBAnswer.asp?questionID=22074&hitOffset=81&docID=888
  5. “Is there a tax credit for water heaters?”EnergyStar. May 16,2011. http://energystar.supportportal.com/ics/support/KBAnswer.asp?questionID=19345