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In
October 2005, The Energy Policy act HR 6 was passed and signed
into law and it entitles all eligible homeowners to tax credits
for energy saving home improvements. During 2006, individuals
can make energy-conscious purchases that will provide tax
benefits for making your principal residence, which must be in
the United States, more energy efficient and for buying certain
energy efficient items.
The law
provides a 10 percent credit for buying qualified energy
efficiency improvements. To qualify, a component must meet or
exceed the criteria established by the 2000 International Energy
Conservation Code (2000 IECC including supplements) and must be
installed in the taxpayer’s main home in the United States. This
is good news for homeowners. A tax credit reduces your
bottom-line tax bill dollar-for-dollar, making it more valuable
than a deduction. |
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| Items such as
replacement windows and other insulation components qualify as
outlined in the IRS Notice 2006-26. While Installation of
components is excluded in most cases, certain procedures over
and above primary installation can be compliant because they
fulfill the requirement to be primarily a component installed to
save energy. Siding alone will not qualify, but certain
components, when included, may comply. What is best for you is
to check with your supplier. As a consumer, you need
certifications from the supplier that the components comply with
the requirements for the tax credit.
There is a limited time available for this credit and it must be
taken within the next 24 months. While windows are earmarked for
$200 credits, installation through companies certified through
The American Window and Door Institute have made available an
additional $300 in credits for proper weatherization. Plus, for
a limited time participating American Window and Door Institute
certified companies are offering instant energy rebates to match
the tax credits making the total savings available to qualified
homeowners up to $1,000 - or more.
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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. The final rules and
forms to clarify which products and services qualify for the
tax credits will be developed by the Internal Revenue
Service (IRS). You must refer to the final IRS rules to
determine what qualifies for the tax credit.
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:
Home Improvements
Tax credits are available for many types of home
improvements including adding insulation, replacement
windows, and certain high efficiency heating and cooling
equipment. See chart.
The maximum amount of homeowner credit for all
improvements combined is $500 during the two year period
of the tax credit. This tax credit applies to
improvements made from January 1, 2006 through December
31, 2007.
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.
Solar Energy Systems
Tax credits are available for qualified solar water
heating and photovoltaic systems. The credits are
available for systems "placed in service" in 2006 and
2007. The tax credit is for 30 percent of the cost of
the system, up to $2,000. This credit is not limited to
the $500 home improvement cap.
Fuel Cells
There is a consumer tax credit of up to 30% of the cost
(up to $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" in 2006 and 2007. This credit is not limited
to the $500 home improvement cap. |
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ENERGY POLICY ACT OF 2005
SUMMARY OF TAX CREDITS FOR HOMEOWNERS1*
|
| Product Category |
Product Type |
Tax Credit Specification |
Tax Credit |
ENERGY STAR Specification |
|
Windows |
Exterior Windows |
Meet 2000 IECC &
Amendments
Energy Star Rated
Manufacturer's Certification |
10% of cost not to
exceed $200 total |
Climate dependant – 4
Zones |
| Skylights |
Meet 2000 IECC &
Amendments Energy Star Rated
Manufacturer's Certification |
10% of cost not to
exceed $200 |
Climate dependant – 4
Zones |
| Exterior Doors |
Meet 2000 IECC &
Amendments Energy Star Rated
Manufacturer's Certification |
10% of cost not to
exceed $500 |
Climate dependant – 4
Zones |
| Roofing |
Metal Roofs |
ENERGY STAR qualified |
10% of cost not to exceed $500 |
Minimum Solar Reflectance |
| Insulation |
Insulation |
Meet 2000 IECC &
Amendments |
10% of cost not to
exceed $500 |
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
Installation costs are not included.
Manufacturer's Certification Statement
required.
For tax purposes, save receipt or the ENERGY
STAR label from all your new windows or
certification letter(s). |
| HVAC |
Central A/C |
EER 12.5/SEER 15 Split Systems
EER 12/SEER 14 Package systems |
$300 |
EER 11.5/ SEER 14 Split systems
EER 11/SEER 14 Package systems |
| Air Source Heat Pumps |
HSPF 9 EER 13 SEER 15 |
$300 |
HSPF 8.2 EER 11.5 SEER 14 Split
HSPF 8 EER 11 SEER 14 Package |
| Geo-Thermal Heat Pump |
Same criteria as ENERGY STAR:
EER 14.1 COP 3.3 Closed Loop
EER 16.2 COP 3.6 Open Loop
EER 15 COP 3.5 Direct Expansion |
$300 |
EER 14.1 COP 3.3 Closed Loop
EER 16.2 COP 3.6 Open Loop
EER 15 COP 3.5 Direct Expansion |
| Gas, Oil, Propane Water Heater |
Energy Factor 0.80 |
$300 |
N/A |
| Electric Heat Pump Water Heater |
Energy Factor 2.0 |
$300 |
N/A |
| Gas, Oil, Propane Furnace or Hot Water
Boiler |
AFUE 95 |
$150 |
AFUE 90 for furnaces
AFUE 85 for boilers |
| Advanced Main Air Circulating Fan |
No more than 2% of furnace total energy
use |
$50 |
N/A |
| Cars |
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 |
|
| Solar Energy Systems |
Solar Water Heating |
The system must use solar power to
provide at least half of a home’s hot water.
The credit is not available for expenses for
swimming pools or hot tubs. The water must
be used in the dwelling and the system must
be certified by the Solar Rating and
Certification Corporation (SRCC). |
30 % of cost, up to $2,000 |
|
| Photovoltaic Systems |
Photovoltaic systems must provide
electricity for the residence, and must meet
applicable fire and electrical code
requirement. |
30 % of cost, up to $2,000 |
|
| Fuel Cells |
Fuel Cells |
Efficiency of at least 30% and must have
a capacity of at least 0.5 kW. |
30% of the cost, up to $1000 per kW of
power that can be produced |
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*1Tax Credits for Home Builders:
Home builders are eligible for a $2,000 tax credit
for a new energy efficient home that achieves 50
percent energy savings for heating and cooling over
the 2004 International Energy Conservation Code (IECC)
and supplements. At least 1/5 of the energy savings
must come from building envelope improvements. This
credit also applies to contractors of manufactured
homes conforming to Federal Manufactured Home
Construction and Safety Standards. There is also a
$1,000 tax credit to the producer of a new
manufactured home achieving 30 percent energy
savings for heating and cooling over the 2004 IECC
and supplements (at least 1/3 of the savings must
come from building envelope improvements), or a
manufactured home meeting the requirements
established by EPA under the ENERGY STAR program.
Please note that, with the exception of the tax
credit for an ENERGY STAR qualified manufactured
home, these tax credits are not directly linked to
ENERGY STAR. Therefore, a builder of an ENERGY STAR
qualified home may be eligible for a tax credit but
it is not guaranteed. These tax credits apply to
qualified new homes built or produced 12/31/05
through 12/31/07.
Tax Credits for Manufacturers:
While not directly affecting consumers,
manufacturers of energy efficient clothes washers,
dishwashers and refrigerators are eligible for tax
breaks themselves, which may lead to increased
availability and a reduction in prices for
energy-saving appliances.
Tax Deductions for Commercial Buildings:
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. Partial deductions of up
to $.60 per square foot can be taken for measures
affecting any one of three building systems: the
building envelope, lighting, or heating and cooling
systems. These deductions are available for
buildings or systems placed in service from January
1, 2006, through December 31, 2007. |
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