A tax credit can provide significant savings. It reduces the amount of income tax you have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a tax credit directly reduces the tax itself. You must refer to the final Internal Revenue Service (IRS) rules to determine what qualifies for the tax credit.
The Internal Revenue Service (IRS) has provided guidance for consumers: IRS Notice 2006-26.
For insulation to qualify for an energy tax credit its primary purpose must be to insulate (example: vapor retarders are covered, siding does not qualify), must be expected to last 5 years OR have a 2 year warranty. Installation costs are not included. Manufacturer's Certification Statement is required.
For tax purposes, save your receipt and the Manufacturer's Certification Statement, which is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.
Tax Credit Specification: Meets 2000 IECC & Amendments
Tax Credit: 10 percent of cost, up to $500