Energy-efficient upgrades and to save energy by requiring high-efficiency equipment and products.

Documenting the Tax Credit:
The new tax code for 2009-10, which will offer guidance and clarifications on the credit, will not be available until early August. Here are the basic steps homeowners will need to follow to claim the credit:

Step 1: Fill out IRS form 5695. The IRS currently has the 2008 version of the form.

Step 2: Enter the information from form 5695 in the Tax and Credits section of form 1040.

Step 3: The taxpayer must keep the invoice for his or her files but does not need to submit it with the tax return. The amount for the qualifying improvement or equipment on this invoice would be used in form 5695. Klein says that remodelers should provide homeowners with a detailed invoice that includes serial and model numbers for the equipment or products.

If the work is part of a larger remodel, the remodeler will have to provide a separate section on the statement that covers the tax-qualified items, or can even create a separate invoice. According to the Energy Star website, the cost can include sales tax and, since the price of a credit is defined as what a home­owner pays for it, most tax preparers assume that a subcontractor’s markup can be included in the price. However, the IRS has not yet provided clarification on a remodeler’s markup of a subcontractor invoice.

Step 4: The taxpayer must keep the manufacturer’s certification for his or her files but does not need to submit it with the tax return. A manufacturer’s certification is a signed statement from the manufacturer stating that the product or component qualifies for the tax credit.

Though the IRS has not yet released guidelines on what information must be included in the certification, it recently announced that homeowners claiming the credit can temporarily rely on existing manufacturer certifications or appropriate Energy Star labels in purchasing qualifying equipment before June 1, 2009, until updated certification guidelines are issued later this year.

Until then, most manufacturers are using previous tax credit guidelines to create certifications. Many manufacturers offer online downloads of the certification. Subcontractors may also provide certifications.

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