Green Federal Tax Credits You May Not Know About

13 Apr

Uncle Sam Wants You(r)... Green

Your home improvement may be green without your knowing it.

“The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.” – Mark Twain

The tax man cometh, so in an effort to help you gain back some of your hard earned green and reducing your energy bills I bring The American Recovery and Reinvestment Act of 2009, which extended and expanded earlier laws.  Make sure you have consulted your tax consultant or accountant if you have made or plan to make any improvements or upgrades to your home,  especially if you purchased or are in need of expensive items such as new air conditioning, water heaters or windows.  Your improvement maybe green without your knowing it. Here is a breakdown of the Federal Tax credits for green home improvements and upgrades taken directly from the DSIRE website (Check their site for more details and local green tax incentives):

Energy Efficiency Tax Credits

This credit applies to energy efficiency green improvements in the building envelope of existing homes and for the purchase of high-efficiency heating, cooling and water-heating equipment. Efficiency improvements or equipment must serve a dwelling in the United States that is owned and used by the taxpayer as a primary residence. The maximum amount of homeowner credit for all improvements combined is $1,500 for equipment purchased during the two-year period of 2009 and 2010.

Building Envelope Green Improvements
Owners of existing homes receive a tax credit worth 30% of the cost of upgrading the efficiency of the building’s envelope. Installation (labor) costs are not included. The following green improvements are eligible for the tax credit:

  • Insulation materials and systems designed to reduce a home’s heat loss or gain
  • Exterior doors and windows (including skylights) and
  • Pigmented metal roofs designed to reduce heat gain, and asphalt roofs with appropriate cooling granules.

Green Energy Efficient Heating, Cooling and Water-Heating Equipment
Taxpayers who purchase qualified residential green energy-efficient property are eligible for a tax credit worth 30% of the system cost, including labor costs. The credit may also be applied to labor costs for assembly and original installation of eligible property. The following types of equipment are eligible:

  • Electric heat pump water heaters
  • Electric heat pumps
  • Central air conditioners
  • Natural gas, propane or oil water heaters
  • Natural gas, propane or oil furnace or hot water boilers
  • Advanced main air circulating fans
  • Biomass stoves that use “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”

See the Energy Star web site for more information on qualifying green products.

Renewable Energy Green Tax Credit

A taxpayer may claim a credit of 30% of qualified expenditures for a system for a dwelling unit located in the United States and used as a residence by the taxpayer. Expenditures with respect to the equipment are made when the installation is completed. If the installation is on a new home, the “placed in service” date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to connect to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The excess credit can be carried forward until 2016, but it is unclear whether the unused tax credit can be carried forward after then. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.

Solar-electric

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service before January 1, 2009.
  • This green technology must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • The home served by the system does not have to be the taxpayer’s principal residence.
  • Note that the Solar Energy Industries Association (SEIA) provides answers to frequently asked questions regarding the federal tax credits for solar energy.

Solar water-heating

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service before January 1, 2009.
  • This green system must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • Equipment must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the government of the state in which the property is installed.
  • At least half the energy used to heat the dwelling’s water must be from solar in order for the solar water-heating property expenditures to be eligible.
  • The tax credit does not apply to solar water-heating property for swimming pools or hot tubs.
  • The home served by the system does not have to be the taxpayer’s principal residence.
  • Note that the Solar Energy Industries Association (SEIA) provides answers to frequently asked questions regarding the federal tax credits for solar energy.

Fuel cell

  • The maximum credit is $500 per half kilowatt (kW).
  • This green system must be placed in service on or after January 1, 2006, and on or before December 31, 2016.
  • The fuel cell must have a nameplate capacity of at least 0.5 kW of electricity using an electrochemical process and an electricity-only generation efficiency greater than 30%.
  • In case of joint occupancy, the maximum qualifying costs that can be taken into account by all occupants for figuring the credit is $1,667 per half kilowatt. This does not apply to married individuals filing a joint return. The credit that may be claimed by each individual is proportional to the costs he or she paid.
  • The home served by the system must be the taxpayer’s principal residence.

Small wind-energy

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $500 per half kilowatt, not to exceed $4,000, for systems placed in service in 2008.
  • This green system must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
  • The home served by the system does not have to be the taxpayer’s principal residence.

Geothermal heat pumps

  • There is no maximum credit for systems placed in service after 2008. The maximum credit is $2,000 for systems placed in service in 2008.
  • This green system must be placed in service on or after January 1, 2008, and on or before December 31, 2016.
  • The geothermal heat pump must meet federal Energy Star program requirements in effect at the time the installation is completed.
  • The home served by the system does not have to be the taxpayer’s principal residence.

There are also many local green and energy efficiency programs available from states, local governments and utility companies.  For example take a look at Palm Desert, California and their Energy Independence Program.  It pays to do a little research and find out what green incentives are out there to save money now as well as down the line, on energy use.

“Intaxication: Euphoria at getting a refund from the IRS, which lasts until you realize it was your money to start with” – Author unknown, from a Washington Post word contest

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