Being energy efficient isn’t just good for the environment; it is good for your wallet too! Not only do you save money by lowering your energy bills each month but you are also able to get some tax credits. While some of these credits have changed since 2010, there are still plenty of ways that you can save money by improving the energy efficiency of your New Jersey home.  Taxes are confusing, but this is one tax credit that is easy to understand without your accountant. We found this great guide on Bizactions.com that explains exactly what you can do to improve your home and claim these tax credits.

The federal government offers two different tax credits for energy-saving home improvements. The rules for one credit changed for the worse since last year. The other credit remains as generous as ever. Here’s what you need to know if you want to claim these credits this year.

1. Modest Credit for Garden Variety Energy-Saving Improvements

2. Bigger Credit for More Expensive Energy-Saving Equipment

The first credit equals 10 percent of certain qualified home improvement expenditures plus 100 percent of certain other expenditures–subject to a rather stingy overall credit cap of $500. And you must reduce that already-skimpy cap by credits claimed in earlier years. While the $500 cap is uninspiring, the good news is the credit covers a broad range of energy-saving expenditures for your principal U.S. residence, and there are no income limits. However improvements made to vacation homes and foreign residences are not eligible. You may remember that the 2010 version of this credit was much more generous. It equaled 30 percent of qualified expenditures — subject to a $1,500 cap. The current version with the $500 cap is scheduled to expire at year end. Because it is doubtful that the credit will be extended, you may need to take action this year to benefit. Here are more details on the $500 credit. Claiming the Credit for Improvement Costs For the following home improvements, the maximum credit equals 10 percent of qualified 2011 expenditures up to the $500 limit (reduced by any credit claimed in earlier years). Exterior windows including skylights and storm windows, subject to a $200 credit cap. Exterior doors including storm doors. Insulation. Metal and asphalt roofs with heat-reduction components. For these items, you cannot count costs for site preparation, assembly, or installation. Claiming the Credit for Equipment Costs For the following items, the maximum credit equals 100 percent of qualified 2011 expenditures up to the $500 limit (reduced by any credit claimed in earlier years). High-efficiency central air conditioners; electric heat pumps, electric heat pump water heaters; water heaters that run on natural gas, propane or oil; and biomass fuel stoves used for heating or hot water. The cap for these items is $300. Furnaces and hot water boilers that run on natural gas, propane, or oil–subject to a cap of $150. Advanced main air circulating fans used in natural gas, propane, and oil furnaces–subject to a cap of $50. For these items, costs for site preparation, assembly, and installation are eligible for the credit. Manufacturer’s Certification Is Required You must obtain a manufacturer’s certification that the product in question qualifies for the $500 credit. The certification may be on the product packaging, or you may be able to print it out from the manufacturer’s website. In any case, keep the certification with your tax records. You won’t need to attach the certification to your Form 1040, but Form 5695 (Residential Energy Credits) will be included with your return.

The second credit equals 30 percent of qualified expenditures to buy and install more-exotic (and expensive) energy-saving equipment for your home. Because the expenditures for these items can be big, the credit amounts can be big too. And there are no income limits. Even billionaires can take advantage. This second credit is available through 2016, so there is no big hurry. If your 2011 credit is so large that you cannot use it all up on this year’s return, you can carry the excess forward to 2012 and beyond. Qualified Expenditures The credit equals 30 percent of qualified expenditures including costs for site preparation, assembly, installation, piping, and wiring for the following gear. Solar water heating equipment for your U.S. residence (including a vacation home). Solar electricity generating equipment for your U.S. residence (including a vacation home). Wind energy equipment for your U.S. residence (including a vacation home). Geothermal heat pump equipment for your U.S. residence (including a vacation home). Fuel cell electricity generating equipment for your U.S. principal residence. Vacation homes don’t count here. For this part of the credit, the maximum annual credit amount is limited to $500 for each .5 kilowatt hour of fuel cell capacity that you add during that year. Special Rules You cannot claim the credit for equipment used to heat a swimming pool or hot tub, and special rules apply to expenditures for residential co-op and condominium buildings. You Must Get a Manufacturer’s Certification Again, you are required to obtain a manufacturer’s certification stating that the equipment in question qualifies for the credit. You don’t need to attach it to your Form 1040, but keep it with your tax records. A completed Form 5695 will be included with your return. Finally, keep proof of exactly much you spend — including any extra amounts for site preparation, assembly, installation, piping, or wiring.

Check for Additional Cash Inducements

You might also be eligible for state and local income tax benefits, subsidized state and local financing deals, and utility company rebates. These additional inducements can amount to hundreds of dollars or more.