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On Tuesday, the president signed into law the American Recovery and Reinvestment Act of 2009. This law contains provisions that dole out generous tax credits for those of us making energy efficiency improvements to our homes (like foam insulation).

The two main components relate to energy efficiency improvements and a huge credit for first time home owners.

The energy efficiency portion of the bill is an extension and enhancement of the Energy Policy Act of 2005. That law allowed a dollar for dollar tax credit of 10% (up to a maximum credit of $500) of energy efficiency improvements made to a primary residence in the years 2006 and 2007. There is no credit available for improvements made in 2008.

The new law extends that amount to 30% (up to a maximum credit of $1,500) for improvements made in 2006, 2007, and 2009.

Keep in mind that it is a cumulative credit, so if you already took $500 worth of the credit in 2006 or 2007, your maximum credit for 2009 is $1,000. Either way, Uncle Sam is giving out free cash! Consult your tax advisor to ensure any work you do qualifies for the credit. Most Energsmart work qualifies, but please ask us to be sure. Remember, this tax credit is for work done to your primary residence that makes it more energy efficient.

There is also a very generous tax credit available for up to $8,000 for first time home buyers (existing homes or newly constructed).

The credit just requires you to buy the house and use it as your primary residence, but Energsmart urges you to use some of that money to make your new home more energy efficient. 

For full details on the new home credit, go to www.federalhousingtaxcredit.com.