Energy Tax Credits for Home Improvements in US
Homeowners Save Money on Taxes with Energy Efficient Rebuilds
Aug 23, 2009
The Federal Energy Efficiency Tax Incentives that were extended and enlarged as part of The American Recover and Reinvestment Tax Act of 2009 include changes such as extending the date that improvements can be put into service until December 31, 2010, the credit cap has been increased to $1,500 from the original $500 and these incentives are to be 30% of the cost of purchasing new energy efficient improvements to homes such as windows, doors, heating, cooling and water heating equipment.
Tax Credit Not a Deduction
These incentives are tax credits which are credits that are applied directly to the amount of taxes owed. These are not deductibles that would only lower the amount of net income. This makes these incentives even more valuable because the money goes directly into the taxpayers' pockets. This means that 30% of the cost of purchasing a new improvement comes directly off of the tax that is owed at the end of the year for a taxpayer with a qualifying purchase.
Plug-In Hybrids and Plug-In Conversions
The incentives were also extended to include credits for vehicles that are either converted into plug-in hybrids or that are purchased as such.
What is Included in the Tax Credit
Homeowners can get credits for purchases made to make their homes more energy efficient including, windows, doors, insulation, and duct sealing. They can also get credits for energy efficient heating and cooling systems such as efficient air conditioners and heat pumps, gas, oil or electric heat pump water heaters, and gas or oil furnaces and furnace fans. These types of purchases are credited at 30% of the purchase price and have a cap of a $1,500 tax credit for any combination of these items.
Special Tax Credits for Solar, Wind Power and Geothermal Heat Pumps
Solar photovoltaic and hot water systems, small wind systems, and geothermal heat pumps were added to the incentives. This is above and beyond other forms of energy efficient improvements. Installation of these kinds of systems means a 30% tax credit but these systems do not have a cap and are not included in the regular tax credit cap. So any amount of money that is spent on these systems is can be subject to the 30% credit.
Fuel Cell Tax Credits
Although difficult to find and very expensive for commercial buildings to use, fuel cells can be installed and their purchase applies toward a tax credit. Fuel cells help to generate power at their installation site, but are not yet widely used and are somewhat cost prohibitive.
State and Utility Incentives
Some states and utility companies are issuing their own incentives to encourage their homeowners to purchase energy efficient improvements. Offers are also being advertised in the Energy Star Rebate Finder which looks for special offers and rebates from Energy Star partners.
The IRS website can also provide more specific information about how to take these credits.
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