Tax Incentives for Residential Buildings
On this page you'll find information about the tax deductions available for purchasing and installing energy-efficient products and constructing new energy-efficient homes.
The American Recovery and Reinvestment Act of 2009 offers tax credits for residential energy efficiency measures and renewable energy systems. Many of these credits were originally introduced in the Energy Policy Act of 2005 (EPACT) and amended in the Emergency Economic Stabilization Act of 2008 (P.L. 110-343).
Energy Efficiency Tax Credits for Existing Homes
Homeowners are eligible for a tax credit of 30% of the cost for improvements to windows, roofing, insulation, and heating and cooling equipment. These improvements must be placed in service from January 1, 2009 through December 31, 2010 and there is a limit of $1,500 for all products. Improvements made in 2008 are not eligible for a tax credit. See the ENERGY STAR® Web site for a detailed listing of eligible improvements.
Renewable Energy Tax Credits for Existing or New Homes
Homeowners can receive a tax credit of 30% of the cost of the following renewable energy technologies with no upper limit: geothermal heat pumps, photovoltaic systems, solar water heaters, and small wind energy systems. Fuel cells are also eligible for a tax credit with a cap. These must be placed in service by December 31, 2016. See the ENERGY STAR Web site for detailed information.
The Internal Revenue Service offers information on these tax incentives:
Energy Provisions of the American Recovery and Reinvestment Act of 2009
Energy-Saving Steps This Year May Result in Tax Savings Next Year
The Tax Incentives Assistance Project offers a flyer with more information about these tax credits for homeowners.
Tax Credits for Home Builders
Builders will receive a credit for energy-efficient homes that are substantially completed after August 8, 2005 and purchased for use as a residence from January 1, 2006 through December 31, 2009. Homes must achieve reductions in heating and cooling energy consumption relative to the 2004 International Energy Conservation Code (IECC) and supplements.
Home builders can receive a credit of $2,000 for homes meeting a 50% energy savings with at least 1/5 of the savings coming from building envelope improvements. This credit also applies to contractors of manufactured homes.
Producers of new manufactured homes can receive a $1,000 tax credit for meeting a 30% energy savings with at least 1/3 of the savings coming from building envelope improvements. As an alternative, manufactured homes may also meet the ENERGY STAR program requirements to qualify for this credit.
See the ENERGY STAR Web site for further information for builders.
Additional Information
The following sites and publications will provide additional information.
- Consumer Energy Tax Incentives—A Department of Energy (DOE) Web site.
- Tax Breaks for Businesses, Utilities, and Governments—A DOE Web site.
- Existing Residential Retrofit Measures—An IRS Web site with guidance for the 2005 EPACT.
- New Home Construction and Manufactured Housing—An IRS Web site with guidance for the 2005 EPACT.
- ENERGY STAR—Additional information about tax deductions for consumers and home builders.
- The Tax Incentives Assistance Project—This group provides information about federal income tax incentives for energy efficient products and technologies. Specifically, see a listing of provisions from the American Recovery and Reinvestment Tax Act of 2009.
- Database of State Incentives for Renewables & Efficiency—This site offers a comprehensive source of information on state, local, utility, and federal incentives that promote renewable energy and energy efficiency.
Note: Every effort is made here to provide accurate information on these tax incentives; however, a tax professional should be consulted on questions for specific situations.