2009 signifies the return of the federal tax credit for non-solar tankless water heaters
under the Energy Policy Act of 2005, which expired at the end of 2007. This successful program
was extended under the "Emergency Economic Stabilization Act of 2008". The act re-establishes
tax credits for purchasing and installing energy efficient home improvements, such as a
Tankless Water Heater.
Improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) —
use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010.
Improvements made in 2010 will be claimed on your 2010 taxes (filed by April 15, 2011) —
use IRS Tax Form 5695.
For more information on the bill, check out the
U.S. Department of Energy website.
What is a tax credit?
A Tankless Water Heater Tax Credit is not received when you buy the product, like an instant
rebate. A Tax Credit on Water Heaters is claimed on your federal income tax form at the
end of the year. The credit then increases the tax refund you receive or decreases the amount
paid in.
Tax credits vs. tax deductions.
In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces
the tax you pay, dollar-for-dollar. Tax deductions – such as those for home mortgages
and charitable giving, for example – lower your taxable income.
If you are in the 30 percent tax bracket, your income tax is reduced by
30 percent of the value of a tax deduction. But a tax credit reduces your
federal income tax by 100 percent of the amount of the credit.
For more information on Federal Tax Credits for Energy Efficiency,
click here.
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