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September 3, 2009 @ 12:57 pm
Tax Incentives Galore for U.S. Energy Savings

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As a result of federal legislation, there a multitude of tax breaks available for residential and commercial renovation and construction projects completed this year and in some cases continuing to 2016. Below I have provided briefings on the tax credits available to homeowners, builders and the tax deductions available to commercial building owners/designers. This post focuses on federal incentives, but many states also offer incentives for renewables and energy efficiency; details can be found at http://www.dsireusa.org/.

Homeowners
There are three categories of improvements homeowners can make with different benefits and timelines: 1) Energy efficiency – replacing/installing qualified windows/doors, insulation, roofs, HVAC, water heaters and biomass stoves can result in a tax credit at 30% of the cost up to $1,500 in 2009 and 2010. 2) Renewable energy – geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells qualify for tax credits of 30% of the cost with upper limit on the amount through 2016. 3) Cars – $2,500-$7,500 credit for plug-in hybrids (up to 250,000 vehicles) and a tax credit amount based on an efficiency formula for hybrid gas-electric, diesel, battery-electric, alternative fuel and fuel cell vehicles (60,000 vehicle limit per manufacturer so Toyota and Honda have been phased out but it is available for Ford, GM and Nissan).

Given the limitation in category 1, homeowners should choose improvements wisely to maximize the monetary benefits. Generally speaking, adding attic and wall insulation and sealing air leaks provide the most bang for your buck (particularly in colder climates); each can generally be installed for several hundred dollars and each can provide over $200 in annual savings (again, best results in colder climates). The table below taken from the Energy Star website provides a summary of the tax credit details and requirements (I left out the “Notes” column).

Product Category

Product Type

Tax Credit Specification

Tax Credit

Insulation Insulation Meets 2009 IECC & Amendments 30% of cost, up to $1,5001
Windows & Doors Exterior Windows and Skylights Before June 1, 2009:Must meet ENERGY STAR criteriaAfter June 1, 2009:U factor <= 0.30SHGC <= 0.30 30% of cost, up to $1,5001
Storm Windows In combination with the exterior window over which it is installed:

  1. has a U-factor and SHGC of 0.30 or below
  2. Meets the IECC
30% of cost, up to $1,5001
Exterior Doors Before June 1, 2009:Must meet ENERGY STAR criteriaAfter June 1, 2009:U factor <= 0.30SHGC <= 0.30 30% of cost, up to $1,5001
Storm Doors In combination with a wood door over which it is installed:

  1. has a U-factor and SHGC of 0.30 or below
  2. Meets the IECC
30% of cost, up to $1,5001
Roofing Metal Roofs, Asphalt Roofs All ENERGY STAR qualified metal and reflective asphalt shingles 30% of cost, up to $1,5001
HVAC Central A/C Split Systems:EER >=13SEER >= 16Package systems:EER >= 12

SEER >= 14

30% of cost, up to $1,5001
Air Source Heat Pumps Split Systems:HSPF >= 8.5EER >= 12.5SEER >= 15Package systems:

HSPF >= 8

EER >= 12

SEER >= 14

30% of cost, up to $1,5001
Natural Gas or Propane Furnace AFUE >= 95 30% of cost, up to $1,5001
Oil Furnace AFUE >= 90 30% of cost, up to $1,5001
Gas, Propane, or Oil Hot Water Boiler AFUE >= 90 30% of cost, up to $1,5001
Advanced Main Air Circulating Fan No more than 2% of furnace total energy use. 30% of cost, up to $1,5001
Water Heaters Gas, Oil, Propane Water Heater Energy Factor >= 0.82or a thermal efficiency of at least 90%. 30% of cost, up to $1,5001
Electric Heat Pump Water Heater Same criteria as ENERGY STAR: Energy Factor >= 2.0 30% of cost, up to $1,5001
Biomass Stove Biomass Stove Stove which burns biomass fuel to heat a home or heat water.Thermal efficiency rating of at least 75% as measured using a lower heating value. 30% of cost, up to $1,5001
Geo-Thermal Heat Pump Geo-Thermal Heat Pump Same criteria as ENERGY STAR:Closed Loop:EER >= 14.1COP >= 3.3Open Loop:

EER >= 16.2

COP >= 3.6

Direct Expansion:

EER >= 15

COP >= 3.5

30% of cost
Solar Energy Systems Solar Water Heating At least half of the energy generated by the “qualifying property” must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household.The credit is not available for expenses for swimming pools or hot tubs.The water must be used in the dwelling.The system must be certified by the Solar Rating and Certification Corporation (SRCC). 30% of cost
Photovoltaic Systems Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement. 30% of cost
Small Wind Energy Systems Residential Small Wind Turbines Has nameplate capacity of not more than 100 kilowatts. 30% of cost
Fuel Cells Residential Fuel Cell and microturbine system Efficiency of at least 30% and must have a capacity of at least 0.5 kW. 30% of the cost, up to $500 per .5 kW of power capacity
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
Plug-in hybrid electric vehicles   $2,500–$7,500

1Subject to a $1,500 maximum per homeowner for all improvements combined.

Home Builders
Home builders can receive a $2,000 tax credit for each new energy efficient home that achieves 50% energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements. The homes must be completed and sold by December 31, 2009. For manufactured homes the credit is $1,000 to the producer and the home must achieve 30% energy savings for heating and cooling over the 2004 IECC and supplements, or the home must meet the requirements established by EPA under the ENERGY STAR program. For more details, see here.

Commercial Buildings
According to Energy Star, “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 tax deductions are available for systems “placed in service” from January 1, 2006 through December 31, 2013.” The link above provides information on calculations, IRS guidance, etc. 

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One Response to “Tax Incentives Galore for U.S. Energy Savings”

  1. GreenBldgBlog - Home Says:

    [...] Qualifies for $1,500 tax credit discussed in this post [...]

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