Tax credits are now available for home improvements:

 - Must be “placed in service” from January 1, 2009 through December 31, 2010

-Must be for taxpayer’s principal residence, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, and    small wind energy systems (where second homes qualify)

- $1,500 is the maximum total amount that can be claimed for all products placed in service in 2009 & 2010 for most home improvements, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, fuel cells, and small wind energy systems which are not subject to this cap, and are in effect through 2016

- Must have a Manufacturer Certification Statement to qualify

- For record keeping, save your receipts and the Manufacturer Certification Statement

- Improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) — use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010

- If you are building a new home, you can qualify for the tax credit for geothermal heat pumps, photovoltaics, solar water heaters, small wind energy systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters.  

Yes, insulation can qualify for a tax credit of 30% of the cost (not including installation/labor costs), up to $1,500 in 2009 and 2010. For insulation to qualify, its primary purpose must be to insulate (example: insulated siding does not qualify). It must also have a Manufacturer’s Certification Statement to qualify.

Typical bulk insulation products can qualify, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place.

Products that air seal (reduce air leaks) can also qualify, as long as they come with a Manufacturers Certification Statement, including:

• Weather stripping

• Spray foam in a can, designed to air seal

• Caulk designed to air seal

• House wrap

Recommended insulation levels (R Values) for your home.

—————————————————————————————————————————

Source:

The law (Section 25C) specifies: … any insulation material or system which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit, and meets the prescriptive criteria for such material or system established by the 2009 International Energy Conservation Code, as such Code (including supplements) is in effect on the date of the enactment of the American Recovery and Reinvestment Tax Act of 2009,

The IRS (Notice 2009-53) specifics: (a) An insulation material or system (including any vapor retarder or seal to limit infiltration) that–(i) Is specifically and primarily designed (within the meaning of section 4.03 of this notice) to reduce heat loss or gain of a dwelling unit when installed in or on the dwelling unit; and(ii) May be taken into account in determining whether the building thermal envelope requirements established by the International Energy Conservation Code (IECC) are satisfied.