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US Federal tax credits for energy efficiency and alternative energy sources have been expanded. The credits have been tripled in many cases. Credits apply to consumers, business and home builders.
The American Recovery and Reinvestment Act of 2009 extended and increased tax credits for energy efficiency. This incentive encourages greater utilization of the most abundant and easily harvested energy source in existence – efficiency.
In the finance world, almost every personal finance advisor will recommend paying yourself first. Typically, this means reducing credit card debt, which immediately provides a benefit in reduced interest payments. Similarly, replacing old energy-using equipment with new and efficient models yields an immediate reduction in energy costs.
The IRS encourages this behavior through generous subsidies in the form of tax credits. The recovery act that President Obama signed on February 17, 2009 extends 2009 credits through 2010 and increases credits from 10% to 30%. This means it is now even easier to afford lower energy bills because the tax credits are three times larger. Credits are offered to consumers, businesses and builders. The credits are strongly linked to the very effective Energy Star program.
The tax credits cover a wide range of energy efficiency activities. This table lists the main areas. For full details, visit the Energy Star tax credit web site.
| Product Type | Tax Credit |
|---|---|
| Exterior Windows and Skylights | 30% of cost, up to $1,500 |
| Storm Windows | 30% of cost, up to $1,500 |
| Exterior Doors | 30% of cost, up to $1,500 |
| Storm Doors | 30% of cost, up to $1,500 |
| Metal Roofs, Asphalt Roofs | 30% of cost, up to $1,500 |
| Insulation | 30% of cost, up to $1,500 |
| Central A/C | 30% of cost, up to $1,500 |
| Air Source Heat Pumps | 30% of cost, up to $1,500 |
| Natural Gas or Propane Furnace | 30% of cost, up to $1,500 |
| Oil Furnace | 30% of cost, up to $1,500 |
| Gas, Propane, or Oil Hot Water Boiler | 30% of cost, up to $1,500 |
| Advanced Main Air Circulating Fan | 30% of cost, up to $1,500 |
| Geo-Thermal Heat Pump | 30% of cost - NOT subject to $1,500 cap |
| Gas, Oil, Propane Water Heater | 30% of cost, up to $1,500 |
| Electric Heat Pump Water Heater | 30% of cost, up to $1,500 |
| Biomass Stove | 30% of cost, up to $1,500 |
| Solar Water Heating | 30% of cost, up to $2,000 |
| Photovoltaic Systems | 30% of cost |
| Residential Small Wind Energy Systems | 30% of cost |
| Residential Fuel Cell and Microturbine System | 30% of cost, up to $1,500 per 0.5 kW of power capacity |
| 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 |
| Plug-in Hybrid Electric vehicles | $2,500 to $7,500 |
The hybrid vehicle credit has already been phased out for the very popular Toyota and Honda models. However, the credit is still available for hybrids from other makers, notably Ford, GM and Nissan.
One interesting aspect of the Energy Star tax credit system is its use of geographic location to qualify eligible products. In colder climates, the credits are limited mostly to heating products. In hotter climates, the credits are limited mostly to cooling products. The end result is the same – energy savings.
Home builders can qualify for credits also. Separate credits are provided for building energy efficient traditional homes and for manufactured homes.
Owners and builders of new or existing commercial buildings are also covered. Tax deductions of up to $1.80 per square foot can be realized for buildings that save at least 50% of the heating and cooling energy required by a building that meets ASHRAE Standard 90.1-2001.
Alternative Energy Subsidies - Links
