TAX CREDITS FOR CONSUMERS
Consumers who want to save energy by adding insulation, reflective roofing or installing more energy-efficient windows, doors or heating systems, can get the federal government to pay for 30% of these home improvements via a federal tax credit authorized by the stimulus bill passed by Congress in 2009.
Consumers can receive a tax credit of up to $1,500 for efficiency improvements made this year and next year. That means a household that makes $5,000 worth of energy efficiency improvements by the end of 2010 can get the maximum tax credit of $1,500, or 30% of the cost.
Some equipment-notably solar panels and other home energy systems that use renewable energy-qualifies for the same tax credit, but with no upper limit. People who install solar water heaters, solar panels, geothermal heat pumps, small wind systems or fuel cells are eligible for a federal tax credit that will cover 30% of the cost of these systems. The systems must be in place by 2016.
For the following types of projects, the installation costs, as well as the cost of the equipment, are covered by the tax credit:
- HVAC Systems,
- Insulation
- Windows & Doors
- Roofing
- Biomass stoves,
- Water Heaters,
- Solar Panels
- Heat Pumps,
- Wind Energy Systems, and
- Fuel Cells.
Tax credits of between $2,500 and $7,500 are available for plug-in hybrid electric vehicles. Tax credits also are available for hybrid vehicles, for both personal use and for business use.
Home builders are eligible for a $2,000 tax credit for a new energy-efficient home. A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001.
More information about the tax credits is available from the Environmental Protection Agency's Energy Star program.
On October 3, 2008, President Bush signed into law the “Emergency Economic Stabilization Act of 2008.” This bill extended tax credits for energy efficient home improvements (windows, doors, roofs, insulation, HVAC, and non-solar water heaters). Tax credits for these residential products, which had expired at the end of 2007, will now be available for improvements made during 2009. However, improvements made during 2008 are not eligible for a tax credit.
The bill also extended tax credits for solar energy systems and fuel cells to 2016. New tax credits were established for small wind energy systems and plug-in hybrid electric vehicles. Tax credits for builders of new energy efficient homes and tax deductions for owners and designers of energy efficient commercial buildings were also extended.
Home Improvements
Home improvement tax credits are available for home improvements “placed in service” from January 1, 2009 through December 31, 2009. Any qualified home improvements made in 2008 are not eligible for the tax credit.
Home improvement tax credits are available for insulation, replacement windows, non-solar water heaters, and certain high efficiency heating and cooling equipment. See chart. The maximum amount that a taxpayer may claim from all of these tax credits combined is $500 over the lifetime of the tax credit (2006, 2007 & 2009).
If you are building a new home, you do not qualify for the tax credits for “eligible building envelope components” (windows, doors, insulation, roofs) or “qualified energy property” (HVAC & non-solar water heaters). However, the tax credit for photovoltaics, solar water heaters, small wind systems and fuel cells is available for homeowners building new homes. More.
The Internal Revenue Service (IRS) guidance for consumers: IRS Notice 2006-26.
Efficient Cars
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
Solar Energy Systems
Tax credits are available for qualified solar water heating and photovoltaic systems. The credits are available for systems “placed in service” from January 1, 2006 through December 31, 2016. The tax credit is for 30% of the cost of the system, up to $2,000. After December 31, 2008, this $2,000 cap will be removed for photovoltaic systems (but not solar water heaters). This credit is completely separate from the $500 home improvement credit.
Small Wind Energy Systems
Tax credits are available to homeowners who install residential small wind turbine systems. The credits are available for systems placed in service from January 1, 2008 to December 31, 2016. The tax credit is for 30% of the cost of the system, up to $500 for each half kilowatt of capacity with an overall maximum of $4,000.
Fuel Cells
There is a consumer tax credit of up to 30% of the cost (up to $1,500 per 0.5 kW of capacity maximum) for installing a “qualified” fuel cell and microturbine systems. The credits are available for systems “placed in service” from January 1, 2006 through December 31, 2016. This credit is not limited to the $500 home improvement cap.