Energy Tax Credit

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DEFINITION of 'Energy Tax Credit'

An energy tax credit is given to homeowners who make their homes more energy-efficient by installing energy-efficient improvements. There are both federal energy tax incentives and state rebates. A tax credit is more valuable than an equivalent deduction because a credit reduces the tax dollar-for-dollar whereas a deduction only removes a percentage of the tax liability.

BREAKING DOWN 'Energy Tax Credit'

By researching, individuals can find several different types of energy-efficient improvements that will qualify for tax credits. For example, the American Recovery and Reinvestment Act of 2009 allowed qualified people to claim several credits such as: Home Energy Efficiency Improvement Tax Credits, Residential Renewable Energy Tax Credits and Automobile Tax Credits.

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