A residential taxpayer is entitled to an Indiana income tax deduction on the materials and labor used to install insulation in a taxpayer’s principal place of residence in Indiana.
The insulation deduction is limited to the cost of the insulation (including installation costs) or $1,000, whichever is less. The deduction must be taken for the tax year during which the materials were installed. Excess costs may not be carried forward to subsequent tax years.
This deduction includes the following forms of insulation: material made from fiberglass, rock wool, cellulose, Styrofoam, urea-based foam urethane, vermiculite, perlite, polystyrene, reflective insulation, extruded polystyrene foam, blown-in insulation, rolled insulation, sheet Styrofoam insulation, and wrap insulation. Other materials that qualify for this deduction include weather stripping, storm windows, storm doors, thermal pane windows, and caulking.
The following materials do not qualify for the insulation deduction: automatic setback thermostats, flue opening modifications, mechanical furnace ignition systems, solar energy equipment (such as collectors, rock beds, and heat exchangers), wind energy equipment (such as windmills), geothermal energy equipment, furnace replacement burners, meters, wood burning stoves, sky lights, heat pumps, and temporary plastic window coverings. Materials which are primarily structural or decorative do not qualify for this deduction.
The materials must be installed in the taxpayer’s principal place of residence in Indiana. If the taxpayer’s principal residence is a rental property, the deduction is available only if the costs incurred for insulation are not reimbursed by the landlord.
The portion of the residence being insulated must have been built at least three years prior to the taxable year for which the deduction is taken.
The materials must be new and not used as a replacement for other material. Materials replacing broken or worn-out materials do not qualify for this deduction.
Process for Claiming the Deduction
The taxpayer must submit with the Indiana tax return invoices that document the cost of labor and materials used in installing the insulation. These invoices must also provide the names and addresses of the persons who performed the labor in installing the insulation.