Quick Guide: Energy Efficiency Tax Credits
Federal income tax credits for specific home improvements are available now through 2010 as part of the American Recovery and Reinvestment Act of 2009 (ARRA), which extended energy efficiency tax credits available in 2006 and 2007 but not 2008.
U.S. homeowners can enjoy the “triple crown” of energy efficiency — lower home energy bills, lower federal income taxes, and increased home comfort — by making energy efficiency home improvements that qualify for up to $1,500 in federal income tax credits.
“The ARRA tax credits are very similar to those that were in effect a few years ago and renewed for 2009 only in the Troubled Asset Relief Program last fall,” Steve Nadel, executive director of the American Council for an Energy-Efficient Economy (ACEEE), said in a statement.
Information on the credits is available from the Tax Incentives Assistance Project (TIAP), which sponsored by a coalition of public interest nonprofit groups, government agencies, and other organizations in the energy-efficiency field. The project is designed to give consumers and businesses information they need to make use of the federal income tax incentives for energy-efficient products and technologies passed by Congress as part of the Energy Policy Act of 2005 and amended by subsequent legislation.
Some of the important details on the home improvement tax credits include:
- For each type of qualifying equipment, the credit is for 30 percent of the cost up to $1,500.
- It is a one-time tax credit that can be claimed in part or in whole for tax year 2009 and/or tax year 2010.
- Homeowners who claimed the $500 credit available in 2006-7 can claim the remaining $1,000 credit for additional products bought and installed in 2009 and/or 2010.
- There are two basic categories of qualifying equipment — “building envelope” products and heating and cooling equipment.
- Building envelope products are replacement windows (including storm windows, storm doors, and skylights), certain ENERGY STAR asphalt and metal roofs, insulation, and other sealing products.
- Heating and cooling equipment includes furnaces, boilers, ground source or geothermal heat pumps, gas or propane water heaters, central air conditioning systems (but not window air conditioner units), and biomass stoves.
- Installation costs are not covered for building envelope products.
- Installation costs are covered for heating and cooling equipment.
- For some products, the qualifying criteria are more stringent than they were in 2006 and 2007 and in early 2009 under TARP. For example, all ENERGY STAR windows no longer qualify; now they must meet additional energy efficiency criteria (spelled out on the TIAP web site.)
- Specific efficiency criteria also apply to heating and cooling equipment.
- Under TARP, the 2006-7 criteria for qualifying products were in effect from January 1, 2009 through February 17, 2009, when the ARRA was signed.
- The TARP criteria, however, apply to exterior windows and skylights purchased and put into service before June 1, 2009.
- Homeowners who purchased and put into service equipment under the TARP criteria between January 1 and February 17, 2009, can claim the higher ($1,500) tax credit amount.