The American Recovery and Reinvestment Act of 2009 signed on February 17, 2009, by President Obama has made significant changes to homeowner tax credits for specified energy-efficient home improvements and fuel-efficient hybrid electric vehicles. Some of the more significant changes include the extension of the tax credit through 2010 and the increase in the total available tax credit from 10% to 30%. Of note, improvements made during 2008 are not eligible for the tax credit.
For full details visit the ENERGY STAR® website. You can also check out the Tax Incentive Assistance Project (TAIP).
Some consumers will also be eligible for utility or state rebates, as well as state tax incentives for energy-efficient homes, vehicles and equipment. Each state’s energy office website may have more information on specific state tax information.
About Tax Credits
A tax credit is generally more valuable than an equivalent tax deduction because a tax credit reduces tax dollar-for-dollar, while a deduction only removes a percentage of the tax that is owed. Beginning in tax year 2006, consumers were able to itemize purchases on their federal income tax form, which lowered the total amount of tax they owed the government.
Residential Tax Credits
Home Energy Efficiency Improvement Tax Credits
Consumers who purchased and installed specific products, such as energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in the home can receive a tax credit of up to $1500 for the 2009 and 2010 tax years.
The Energy Policy Act of 2005 provides a credit equal to 30 percent of qualifying expenditures for purchase for qualified photovoltaic property and for solar water heating property used exclusively for purposes other than heating swimming pools and hot tubs. The credit shall not exceed $2000.
Improvements must be installed in or on the taxpayer’s principal residence in the United States. Home improvement tax credits now apply for improvements made between January 1, 2009 and December 31, 2010.
The Internal Revenue Service (IRS) has provided guidance for consumers: IRS Notice 2006-26. ENERGY STAR® is studying IRS guidance. Check the ENERGY STAR® website frequently for updates.
Automobile Tax Credits
Individuals and businesses that buy or lease a new hybrid gas-electric car or truck are eligible for, and can receive, an income tax credit of $250-$3,400 – depending on the fuel economy and the weight of the vehicle. Hybrid vehicles that use less gasoline than the average vehicle of similar weight and that meet an emissions standard qualify for the credit. “Lean-burn” diesel vehicles could also qualify, but currently available diesel vehicles do not meet the emissions standard. There is a similar credit for alternative-fuel vehicles and for fuel-cell vehicles.
If individuals and businesses buy more than one vehicle, they are eligible to receive a tax credit for each. If a tax-exempt organization buys such a vehicle, the retailer is also eligible to receive another credit. Companies that buy heavy-duty hybrid trucks are also eligible for a larger tax credit.
Below is a table of anticipated tax savings and energy savings for energy-efficient home improvements, according to ENERGY STAR®.
| Product Category
| Product Type |
Tax Credit Specification |
Tax Credit |
| Windows |
Exterior Windows |
Meet 2000 IECC & Amendments |
30% of cost up to $1500 total
|
| Windows |
Skylights |
Meet 2000 IECC & Amendments |
30% of cost up to $1500 total
|
| Windows |
Exterior Doors |
Meet 2000 IECC & Amendments |
30% of cost up to $1500 total
|
| Roofing |
Metal Roofs |
Energy Star qualified |
30% of cost up to $1500 total
|
| Insulation |
Insulation |
Meet 2000 IECC & Amendments |
30% of cost up to $1500 total
|
| HVAC |
Central AC |
EER 12.5/SEER 15 split Systems EER 12/SEER 14 package systems |
30% of cost up to $1500 total
|
| HVAC |
Air source heat pumps |
HSPF 9 EER 13 SEER 15 |
30% of cost up to $1500 total
|
| HVAC |
Geothermal heat pump |
EER 14.1 COP 3.3 closed loop
EER 16.2 COP 3.6 open loop
EER 15 COP 3.5 direct expansion |
30% of cost up to $1500 total |
| HVAC |
Gas, oil, propane water heater |
Energy Factor 0.82 |
30% of cost up to $1500 total
|
| HVAC |
Electric heat pump water heater |
Energy Factor 2.0 |
30% of cost up to $1500 total
|
| HVAC |
Gas, oil, propane furnace or hot water boiler |
AFUE 95 |
30% of cost up to $1500 total
|
| HVAC |
Advanced main air circulating fan |
No more than 2% of furnace total energy use |
30% of cost up to $1500 total |
|
* Source: energystar.gov
