How has the new Stimulus bill affected the tax credits for energy efficient home improvements?
What tax credits are available in 2008 for energy efficiency home improvements?
UPDATED April 24, 2009
Quick link to this page: energystar.gov/taxcredits
**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 are now available for home improvements:
Product Category | Product Type | Tax Credit Specification | Tax Credit | Notes |
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Windows & Doors | Exterior Windows and Skylights | *Important Change: Before June 1, 2009:Must meet ENERGY STAR criteria After June 1, 2009: U factor <= 0.30 SHGC <= 0.30 |
30% of cost, up to $1,5002 | Not all ENERGY STAR labeled windows and skylights qualify for tax credit. |
Storm Windows | Meets IECC1 in combination with the exterior window over which it is installed, for the applicable climate zone | 30% of cost, up to $1,5002 | Manufacturer Certification Statement3 will list classes of exterior window (single pane, clear glass, double pane, low-E coating, etc.)4 that a product may be combined with to be eligible in specific climate zones. |
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Exterior Doors | U factor <= 0.30 SHGC <= 0.30 |
30% of cost, up to $1,5002 | Not all ENERGY STAR doors will qualify. |
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Storm Doors | In combination with a wood door assigned a default U-factor by the IECC1, and does not exceed the default U-factor requirement assigned to such combination by the IECC | 30% of cost, up to $1,5002 | ||
Roofing | Metal Roofs, Asphalt Roofs |
ENERGY STAR qualified | 30% of cost, up to $1,5002 | All ENERGY STAR metal and asphalt roofs qualify for the tax credit. Must be expected to last 5 years OR have a 2 year warranty. |
Insulation | Insulation | Meets 2009 IECC & Amendments | 30% of cost, up to $1,5002 |
For insulation to qualify, its primary purpose must be to insulate (example: insulated siding does not qualify). Must be expected to last 5 years OR have a 2 year warranty |
HVAC | Central A/C | Split Systems: EER >=13 SEER >= 16 Package systems: EER >= 12 SEER >= 14 |
30% of cost, up to $1,5002 | For a list of qualified products, go to the Consortium for Energy Efficiency product directory , click on Air Conditioners, then in the “CEE Tier” enter “Residential Advanced Tier 3” for CAC Split Systems, and "Residential Tier 2" for CAC Package Systems and ASHPs. Note — not all ENERGY STAR products will qualify for the tax credit. View ENERGY STAR criteria. |
Air Source Heat Pumps | Split Systems: HSPF >= 8.5 EER >= 12.5 SEER >= 15 Package systems: HSPF >= 8 EER >= 12 SEER >= 14 |
30% of cost, up to $1,5002 | ||
Natural Gas or Propane Furnace | AFUE >= 95 |
30% of cost, up to $1,5002 |
For a partial list of qualifying products go to: Air-Conditioning, Heating, Refrigeration Institute (AHRI) Not all ENERGY STAR products will qualify for the tax credit. View ENERGY STAR criteria for furnaces, boilers. |
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Oil Furnace | AFUE >= 90 |
30% of cost, up to $1,5002 | ||
Gas, Propane, or Oil Hot Water Boiler | AFUE >= 90 |
30% of cost, up to $1,5002 | ||
Advanced Main Air Circulating Fan | No more than 2% of furnace total energy use. Read this FAQ if the fan qualifies, but the furnace does not. | 30% of cost, up to $1,5002 | ||
Water Heaters | Gas, Oil, Propane Water Heater | Energy Factor >= 0.82 or a thermal efficiency of at least 90%. |
30% of cost, up to $1,5002 |
All ENERGY STAR gas tankless water heaters will qualify. There are currently no ENERGY STAR qualified gas storage tank or gas condensing water heaters that qualify. View ENERGY STAR criteria for water heaters. For a partial list of qualifying products go to: Air-Conditioning, Heating, Refrigeration Institute (AHRI) |
Electric Heat Pump Water Heater | Same criteria as ENERGY STAR: Energy Factor >= 2.0 | 30% of cost, up to $1,5002 |
All ENERGY STAR electric heat pump water heaters qualify for the tax credit. |
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Biomass Stove | Biomass Stove | Stove which burns biomass fuel5 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 $1,5002 | |
Geo-Thermal Heat Pump | Geo-Thermal Heat Pump | Same criteria as ENERGY STAR: Closed Loop: |
30% of the cost | All ENERGY STAR geo-thermal heat pumps qualify for the tax credit. Use IRS Form 5695 Must be “placed into service” before December 31, 2016. |
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 |
All ENERGY STAR solar water heaters qualify for the tax credit. Use IRS Form 5695 Must be placed in service before December 31, 2016. |
Photovoltaic Systems | Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement. | 30% of cost | Use IRS Form 5695 Must be placed in service before December 31, 2016. |
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Small Wind Energy Systems | Residential Small Wind Turbines | Has nameplate capacity of not more than 100 kilowatts. | 30% of cost |
Use IRS Form 5695 Must be placed in service before December 31, 2016. |
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 |
Use IRS Form 5695 Must be placed in service before December 31, 2016. |
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 |
There is a 60,000 vehicle limit per manufacturer before a phase-out period begins. Toyota and Honda have already been phased out. Credit is still available for Ford, GM and Nissan. For more information visit: Fueleconomy.gov Use IRS Form 8910 for hybrid vehicles purchased for personal use. Use IRS Form 3800 for hybrid vehicles purchased for business purposes. |
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Plug-in hybrid electric vehicles | $2,500–$7,500 |
The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits). Effective January 1, 2009. |
1Either the 2001 Supplement of the 2000 International Energy Conservation Code or the 2004 Supplement of the 2003 International Energy Conservation Code.
2Subject to a $1,500 maximum per homeowner for all improvements combined.
3A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.
4Additional information on exterior window features may be viewed at Anatomy of an Energy Efficient Window.
5Biomass Fuel means any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.
The IRS defines “placed in service” as when the property is ready and available for use.
Starting January 1, 2009, there is a new tax credit for Plug-in hybrid electric vehicles, starting at $2,500 and capped at $7,500 for cars and trucks (the credit is based on the capacity of the battery system). The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits).
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. See the IRS Website for updated information .
Eligible contractors need to fill out IRS Form 8908 to get the tax credit. The IRS has provided the following guidance regarding the tax credits for constructing energy efficient new homes available under the Energy Policy Act of 2005:
Home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50% 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% 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 new homes located in the United States whose construction is substantially completed after August 8, 2005 and that are acquired from the eligible contractor for use as a residence from January 1, 2006 through December 31, 2009.
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.
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