| Federal Tax Credits for Energy Efficiency UPDATED February 20, 2009 How has the new Stimulus bill affected the tax credits for energy efficient home improvements?On February 17, 2009, President Obama signed a stimulus bill (The American Recovery and Reinvestment Act of 2009) that made some significant changes to the energy efficiency tax credits. The highlights are: - The tax credits that were previously effective for 2009, have been extended to 2010 as well.
- The tax credit has been raised from 10% to 30%.
- The tax credits that were for a specific dollar amount (ex $300 for a CAC), have been converted to 30% of the cost.
- The maximum credit has been raised from $500 to $1500 for the two years (2009–2010). However, some improvements such as geothermal heat pumps, solar water heaters, and solar panels are not subject to the $1,500 maximum.
- The $200 cap on windows has been removed.
Federal Tax Credits for Energy Efficiency include:- Tax Credits for Consumers
- Home Improvement
- Windows and Doors
- Insulation
- HVAC
- Geothermal Heat Pumps
- Water Heaters
- Biomass Stoves
- Solar Energy Systems
- Small Wind Energy Systems
- Fuel Cells
- Cars
**Please note, not all ENERGY STAR qualified homes and products qualify for a tax credit. These tax credits are available for a number of products at the highest efficiency levels, which typically cost much more than standard products. If, for whatever reason, you decide not to purchase a product covered by the tax credit, you may still consider purchasing an ENERGY STAR product. ENERGY STAR distinguishes energy efficient products which, although they may cost more to purchase than standard models, will pay you back in lower energy bills within a reasonable amount of time, without a tax credit. Tax Credits for Consumers: A tax credit can provide significant savings. It reduces the amount of income tax you have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a tax credit directly reduces the tax itself! Tax credits are now available for home improvements: - must be "placed in service" from January 1, 2009 through December 31, 2010
- must be for taxpayers principal residence
- maximum amount is $1,500 in 2009 & 2010 for most home improvements (geothermal heat pumps, solar water heaters, solar panels, fuel cells, and windmills are not subject to this cap)
- for record keeping, save your receipts and the Manufacturer Certification Statement3, OR for windows, you can save the ENERGY STAR label from your new windows
- 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 photovoltaics, solar water heaters, small wind systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters. More.
| Product Category | Product Type | Tax Credit Specification | Tax Credit | Notes |
|---|
| Windows & Doors | Exterior Windows and Skylights | U factor <= 0.30
SHGC <= 0.30 | 30% of cost, up to $1,5002 | Not all ENERGY STAR labeled windows and skylights qualify for tax credit. | | Storm Windows | Meets IECC1 in combination with the exterior window over which it is installed, for the applicable climate zone | 30% of cost, up to $1,5002 | Manufacturer Certification Statement3 will list classes of exterior window (single pane, clear glass, double pane, low-E coating, etc.)4 that a product may be combined with to be eligible in specific climate zones. | | Exterior Doors | U factor <= 0.30
SHGC <= 0.30 | 30% of cost, up to $1,5002 | Not all ENERGY STAR doors will qualify. | | Storm Doors | In combination with a wood door assigned a default U-factor by the IECC1, and does not exceed the default U-factor requirement assigned to such combination by the IECC | 30% of cost, up to $1,5002 | | | Roofing | Metal Roofs,
Asphalt Roofs | ENERGY STAR qualified | 30% of cost, up to $1,5002 | All ENERGY STAR labeled metal and asphalt roofs qualify for the tax credit. Must be expected to last 5 years OR have a 2 year warranty. | | Insulation | Insulation | Meets 2009 IECC & Amendments | 30% of cost, up to $1,5002 | For insulation to qualify, its primary purpose must be to insulate. (example: vapor retarders are covered, siding does not qualify). Must be expected to last 5 years OR have a 2 year warranty | | HVAC | Central A/C | Split Systems:
EER >=13
SEER >= 16
Package systems:
EER >= 12
SEER >= 14 | 30% of cost, up to $1,5002 | For a list of qualified products, go to the Consortium for Energy Efficiency product directory, click on the Air Conditioners and in the “CEE Tier” enter “Residential Advanced Tier 3” for CAC Split Systems, and "Residential Tier 2" for CAC package systems and ASHPs. Note — not all ENERGY STAR products will qualify for the tax credit. ENERGY STAR Spec (same for CAC and ASHP): Split Systems:
HSPF >= 8.2
EER >= 12
SEER >= 14.5 Package systems:
HSPF >= 8
EER >= 11
SEER >= 14 | | Air Source Heat Pumps | Split Systems:
HSPF >= 8.5
EER >= 12.5
SEER >= 15
Package systems:
HSPF >= 8
EER >= 12
SEER >= 14 | 30% of cost, up to $1,5002 | | Natural Gas or Propane Furnace | AFUE >= 95 | 30% of cost, up to $1,5002 | For a list of qualifying products go to the Gas Appliance Manufacturing Association Not all ENERGY STAR products will qualify for the tax credit. ENERGY STAR Spec: Gas Furnaces: AFUE >= 90 Oil Furnaces: AFUE >= 85 Boilers: AFUE >= 85 | | Oil Furnace | AFUE >= 90 | 30% of cost, up to $1,5002 | | Gas, Propane, or Oil Hot Water Boiler | AFUE >= 90 | 30% of cost, up to $1,5002 | | Advanced Main Air Circulating Fan | No more than 2% of furnace total energy use | 30% of cost, up to $1,5002 | For a partial list of qualifying products go to the Gas Appliance Manufacturing Association | | Geo-Thermal Heat Pump | Geo-Thermal Heat Pump | Same criteria as ENERGY STAR: Closed Loop:
EER >= 14.1
COP >= 3.3
Open Loop:
EER >= 16.2
COP >= 3.6
Direct Expansion:
EER >= 15
COP >= 3.5 | 30% of the cost - NOT subject to $1,500 cap | All ENERGY STAR labeled geothermal heat pumps qualify for the tax credit. Use IRS Form 5695  Must be “placed into service” between Jan. 1, 2008–Dec. 31, 2016. | | Water Heaters | Gas, Oil, Propane Water Heater | Energy Factor >= 0.82
or a thermal efficiency of at least 90%. | 30% of cost, up to $1,5002 | Not all ENERGY STAR gas storage and gas condensing water heaters will qualify for the tax credit. All ENERGY STAR gas tankless models will qualify. ENERGY STAR criteria: Gas Storage:
Energy Factor >= .62 Gas Tankless:
Energy Factor >= 0.82 Gas Condensing:
Energy Factor >= 0.8 For a partial list of qualifying products go to the Gas Appliance Manufacturing Association | | Electric Heat Pump Water Heater | Same criteria as ENERGY STAR: Energy Factor >= 2.0 | 30% of cost, up to $1,5002 | All ENERGY STAR qualified electric heat pump water heaters qualify for the tax credit. | | Biomass Stove | Biomass Stove | Stove which burns biomass fuel5 to heat a home or heat water. Thermal efficiency rating of at least 75% as measured using a lower heating value. | 30% of cost, up to $1,5002 | | | Solar Energy Systems | Solar Water Heating | At least half of the energy generated by the “qualifying property” must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household. The credit is not available for expenses for swimming pools or hot tubs. The water must be used in the dwelling. The system must be certified by the Solar Rating and Certification Corporation (SRCC). | 30% of cost | Use IRS Form 5695 Must be placed in service before December 31, 2016. | | Photovoltaic Systems | Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement. | 30% of cost | Use IRS Form 5695 Must be placed in service before December 31, 2016. | | Small Wind Energy Systems | Residential Small Wind Energy Systems | | 30% of the cost | Must be placed in service by December 31, 2016. Use IRS Tax Form 5695 (version 2009). This form should be available in late 2009 or early 2010. Not limited to $1,500 cap. | | Fuel Cells | Residential Fuel Cell and microturbine system | Efficiency of at least 30% and must have a capacity of at least 0.5 kW. | 30% of the cost, up to $1500 per .5 kW of power capacity | Must be placed in service by December 31, 2016. Use IRS Tax Form 5695 (version 2009). This form should be available in late 2009 or early 2010. Not limited to $1,500 cap. | | Cars | Hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles | | Based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models | There is a 60,000 vehicle limit per manufacturer before a phase-out period begins. Toyota and Honda have already been phased out. Credit is still available for Ford, GM and Nissan. For more information visit: Fueleconomy.gov Use IRS Form 8910 for hybrid vehicles purchased for personal use. Use IRS Form 3800 for hybrid vehicles purchased for business purposes. | | Plug-in hybrid electric vehicles | | $2,500–$7,500 | The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits). Effective January 1, 2009. |
Efficient CarsStarting January 1, 2009, there is a new tax credit for Plug-in hybrid electric vehicles, starting at $2,500 and capped at $7,500 for cars and trucks (the credit is based on the capacity of the battery system). The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits). Tax credits are available to buyers of hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. The tax credit amount is based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models. These credits are available for vehicles placed in service starting January 1, 2006. For hybrid and diesel vehicles made by each manufacturer, the credit will be phased out over 15 months starting after that manufacturer has sold 60,000 eligible vehicles. For vehicles made by manufacturers that have not reached the end of the phase-out, the credits will end for vehicles placed in service after December 31, 2010. See the IRS Website for updated information. Copyright 2008 Ronald Sauve All Rights Reserved This page was last modified on April 27, 2010 Bookmark this site!
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