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Expanded energy-efficiency tax credits make lowering energy bills even more attractive
9/8/2009
The expansion of energy-efficiency tax credits for homeowners has presented a unique opportunity for those contemplating a remodeling project for their principal residence. Available until the end of 2010, the revamped Existing Home Retrofit Tax Credit (25C) helps you save two ways: on remodeling costs and on future utility bills.
The expanded federal tax credit refunds 30 percent of the product replacement cost up to a total of $1,500 for improvements made during 2009 and 2010. It can be used not only for HVAC (heating, ventilation and air-conditioning) systems, insulation and water heaters but also for windows and doors, provided the products meet IRS qualifications. In some cases, installation costs may also be eligible for the tax credit.
Alternative energy options (geothermal, solar, wind and fuel cell) are covered under a separate energy credit (25D) and offer even more savings. You can receive a tax credit of 30 percent with no cap, through 2016.
Homeowners can claim the credit only for improvements made to an existing home, either within the current footprint or for improvements installed in an addition to an existing home.
Among the highlights:
• Tax credit eligible products must be reasonably expected to remain in use for at least five years. One method taxpayers can rely on to satisfy this requirement is to purchase products from a manufacturer who offers a warranty lasting at least two years at no additional cost.
• Not all ENERGYSTAR® rated products that are installed qualify for the tax credit. The ENERGYSTAR web site (www.energystar.gov) includes a detailed listing of products that qualify for the section 25C program.
• The credit excludes installation costs for building envelope components — such as insulation and windows. In order for the homeowner to claim the credit, the remodeler must provide an itemized breakout of the cost of these installed products minus the costs of installation and labor.
Qualified energy products: (Installation costs may be included)
• Electric heat pump water heaters that yield an energy factor of at least 2.0 in the standard Department of Energy test procedure.
• Electric heat pumps and central air conditioners that achieve the highest efficiency tier established by the Consortium for Energy Efficiency as of Jan. 1, 2009.
• Natural gas, propane or oil water heaters with an energy factor of at least .82 or thermal efficiency of at least 90%.
• Biomass burning stoves with a thermal efficiency rating of at least 75% as measured using a lower heating value.
• Natural gas and propane furnaces that achieve an annual fuel utilization efficiency rate of not less than 95.
• Natural gas, propane, or oil water boilers and oil furnaces that achieve an annual fuel utilization rate of not less than 90.
• Advanced main air conditioning fans with annual electricity use of no more than 2% of the total annual energy use of the furnace.
Building envelope components: (Installation costs not included)
• Insulation material or system.
• Exterior window, skylight, door, storm window or storm door with a U factor of .3 or below.
• Metal or asphalt roofs that resist heat gain.
The energy-efficiency home products must be “placed in service” between Jan. 1, 2009 and Dec. 31, 2010. The credits are only valid for improvements made to the taxpayer's principal residence, except for qualified geothermal, solar, wind property, which can be installed on any home used as a residence by the taxpayer.
The Wind, Solar, Geothermal and Fuel Cell Tax Credit (Tax Code Section 25D):
Tax credits are available at 30% of the cost, with no cap through 2016 (for existing homes and new construction) for:
• Geothermal Heat Pumps
• Solar Panels
• Solar Water Heaters
• Small Wind Energy Systems
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