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This credit applies to energy efficiency improvements in the building envelope of existing homes and for the purchase of high-efficiency heating, cooling and water-heating equipment. Efficiency improvements or equipment must serve a dwelling in the United States that is owned and used by the taxpayer as a primary residence. The maximum tax credit for all improvements made in 2011 - 2016 is $500. The cap includes tax credits for any improvements made in any previous year. If a taxpayer claimed $500 or more of these tax credits in any previous year, any purchases made in 2011 - 2016 will be ineligible for a tax credit.

Building Envelope Improvements
Owners of existing homes may receive a tax credit worth 10% of the cost of upgrading the efficiency of the building's envelope. Installation (labor) costs are not included and the credit is capped at $500 for all improvements. To be eligible for the credit, the improvement must meet the prescriptive requirements established for it under the 2009 International Energy Conservation Code (including supplements). The following improvements are eligible for the tax credit:

• Insulation materials and systems designed to reduce a home's heat loss or gain
• Exterior doors and windows (including skylights) --- no more than $200 in total credits can be claimed for windows in years 2006 - 2016 Equipment must meet version 6.0 Energy Star program requirements.
• Pigmented metal roofs designed to reduce heat gain, and asphalt roofs with appropriate cooling granules, which are Energy Star certified.

Heating, Cooling and Water-Heating Equipment
Taxpayers who purchase qualified residential energy-efficient property may be eligible for a tax credit. The credit is equal to the full cost of the equipment up to the following caps:

• Advanced main air circulating fan: $50
• Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150
• Electric heat pump water heater with an energy factor of at least 2.0: $300
• Electric heat pump which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
• Central air conditioner which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
• Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300
• Biomass stoves that use "plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers". Systems must have a thermal efficiency rating of at least 75 percent to qualify: $300

Background
The Energy Policy Act of 2005 established the tax credit for energy improvements to existing homes. The credit was originally limited to purchases made in 2006 and 2007, with an aggregate cap of $500 for all qualifying purchases made in these two years combined. There were also separate individual caps for the different equipment types. The Energy Improvement and Extension Act of 2008 (H.R. 1424: Div. B, Sec. 302) of 2008 reinstated the credit for 2009 purchases and made other minor adjustments. The American Recovery and Reinvestment Act of 2009 further extended the credit to include improvements made in 2010 and replaced the $500 aggregate cap with a $1,500 aggregate cap for improvements made in 2009 and 2010. This credit has since been renewed several times, but the credit was reduced to its original form and original cap of $500.

Geothermal heat pumps were originally eligible for this credit, with a $300 cap. However, geothermal heat pumps are now eligible for the residential renewable energy tax credit, with no cap.