The American Recovery and Reinvestment Act
On February 17, 2009, The American Recovery and Reinvestment Act of 2009 made significant changes to the energy efficiency tax credits. These changes apply to products “placed in service” in 2009. The highlights are:
- Tax credits that were previously effective for 2009, have been extended to 2010 as well.
- The tax credit has been raised from 10% to 30%.
- The tax credits that were for a specific dollar amount (ex $300 for a CAC), have been converted to 30% of the cost.
- The maximum credit has been raised from $500 to $1,500 total for the two year period (2009-2010). However, some improvements such as geothermal heat pumps, solar water heaters, and solar panels are not subject to the $1,500 maximum.
- The $200 cap on windows has been removed, but the requirements for windows has been increased significantly. Not all ENERGY STAR qualified windows will qualify.
Federal Tax Credits for Energy Efficiency includes:
- Tax Credits for Consumers
- Tax credits are available at 30% of the cost, up to $1,500, in 2009 & 2010 (for existing homes only) for:
- Windows and Doors
- Roofs (Metal and Asphalt)
- Water Heaters (non-solar)
- Biomass Stoves
- Tax credits are available at 30% of the cost, with no upper limit through 2016 (for existing homes & new construction) for:
- Geothermal Heat Pumps
- Solar Panels
- Solar Water Heaters
- Small Wind Energy Systems
- Fuel Cells
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 now available for home improvements:
- Must be “placed in service” from January 1, 2009 through December 31, 2010
- Must be for taxpayer’s principal residence, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, and small wind energy systems (where second homes and rentals qualify)
- $1,500 is the maximum total amount that can be claimed for all products placed in service in 2009 & 2010 for most home improvements, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, fuel cells, and small wind energy systems which are not subject to this cap, and are in effect through 2016
- Must have a Manufacturer Certification Statement to qualify
- For record keeping, save your receipts and the Manufacturer Certification Statement
- Improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) — use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010
- If you are building a new home, you can qualify for the tax credit for geothermal heat pumps, photovoltaics, solar water heaters, small wind energy systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters.