Tankless Water Heater Tax Credit

What type of water heater you are thinking of buying for your home? Well, you can choose either a tank water heater or a tankless model to serve your purpose. Tank water heaters that consumes various types of fuels, aren't all that practical in today's energy conscious world and brings no tax credit with them. They are controlled by thermostats which switch them 'ON' or 'OFF' throughout the day to maintain the temperature of water in the tank within a preset range. For a household which does not use hot water that often, this mode of operation causes wastage of energy. Use of the tankless water heaters or the instant water heaters is a solution to this problem because these consume energy only when the user switches them on. For this reason, the federal government is offering tankless water heater tax credits to encourage the use of these energy efficient products.

Tax Benefit on Purchase of Tankless Water Heater

Of course, not all the tankless water heater purchases qualify for the tax credits. This makes it essential for one to depend on tankless hot water heater reviews to know which of these items one should look into. Purchasing a water heater (non solar) such as a tankless natural gas hot water heater, propane water heater or the one that works on oil allows the buyer to claim the tax benefits being offered. Therefore, if you are intending to buy a water heater that operates on electricity, you need to reconsider your decision, as, in the 2011, no tax credits are offered for its purchase. However, if you must go for an electric version, then, consider the electric heat pump water heaters because tax credit is applicable to its purchase.

In the past too, tax deductions were offered to encourage the use of energy efficient home appliances such as tankless water heaters. For the 2011-2012, purchase of a tankless water heater can bring you, tax benefit of up to $500 of which $300 is federal tax credit. In addition, the buyer can also claim incentives offered on such purchases by the states governments. To obtain the water heater tax credit, there are certain conditions to fulfill:

• The rules say that an individual who has already claimed or received $500 or more tax benefit during 2006-2011, is not eligible to receive any tax credit in 2011. However, the rules permit one to claim the difference as a tax benefit on a 2011 purchase while filling IRS returns.
• It is also stipulated that one is liable to get this tax credit, only if the installation is carried out in an existing home or in the principal residence (in U.S.A.) of the buyer. The stipulation disqualifies installations made in rentals and new constructions.
• To qualify for these tax deductions for home improvements, the product must meet the strict energy efficiency guidelines set by the U.S.A. Environmental Protection Agency and the Department of Energy. It must have an energy efficiency factor rating of 0.82 (minimum) or thermal efficiency of, at least, 90%. If it is the electric heat pump water heater that you have set your heart on, then, make sure that its energy factor is, at least, 2.0, in order to avail tax benefit ($300).
• The tax credits, which also includes the installation costs, are not the instant rebates and are not offered at the time of purchase.
• At the end of the year, the buyer needs to claim his tax credit on his federal income tax form. This way, the buyer pays decreased amount of tax or he can choose to receive increased amount of the tax refund.
• Tax benefits for tankless water heaters that are installed between January 1st, 2011 and December 31st, 2011, can be claimed by the buyer on IRS tax form 5695.
• Before buying these heaters, make sure to map your requirements for hot water. If you have a big family, or even if, you are single and intends to use hot water for a shower as well as for a washing machine or a dishwater, then consider installing multiple units or the one that is available as 'whole house' type Tankless water heater.

Choose wisely, as this is an opportunities to save money. Once installed, this energy efficient product will help you save on operating costs throughout its life which can be as long as 10-15 years. Protecting the environment by economizing on the expenditure of energy required for the day-to-day activities is the aim behind offering this tax benefit. It is expected that the use of an efficient water heater will reduce the levels of poisonous gases that are emitted when the fossil fuel is burnt, by at least 600-700 lbs per heater per year. This is of real importance as the studies state that, 14 - 25% of energy consumed by a household, is used to heat water. Before you select a gas water heater of this type, it may prove beneficial to go carefully through its reviews to identify the most efficient one. Visiting the IRS sites for videos and podcasts related to energy saving products is also recommended to arrive at the most suitable product for you.