The economic stimulus package signed into law by President Obama includes tax credits for solar and high efficiency hot water heaters. The law revived and expanded tax credits for energy-efficient home improvements that expired in 2007, like hot water heaters.Â Home improvements must be made to primary residences beginning in 2009 to qualify.

If you plan to install a new solar hot water heater for your home, you will be eligible for a tax credit of up to 30% of the cost with no caps on the total amount.Â Previous legislation set caps between $2000 and $4000 dollars for solar water heaters, geothermal heat pumps and wind energy projects.Â Both labor and material costs qualify for the tax credit through 2016, but the solar hot water heater must be used for you home (not your swimming pool or hot tub).

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High efficiency hot water heaters, such as tankless varieties, are also eligible for tax credits under the stimulus package, but there is a cap.Â Up to a $1500 tax credit is available for gas or electric water heaters that have at least a .82 Energy Factor (EF) rating or 90 percent thermal efficiency.Â The amount of the tax credit is dependent upon other energy efficient home improvements you are claiming on your taxes.

The difference between solar and high efficient hot water heater tax credits (cap vs. no cap) shows the priority of the Obama administration to help Americans use renewable energy.Â All Energy Star solar hot water heaters qualify for the tax credit. We’ll be installing a solar hot water heater this summer for our home to work in tandem with our tankless heater.