This article was last updated on January 12
[2013 Update] As part of the deal to avert the fiscal cliff, legislated under the American Taxpayer Relief Act (ATRA) of 2012, certain energy tax credits were extended into 2013. You can read this article for an overview of these credits and other 2013 income tax related changes.
- The$500 tax credit for installing energy efficient improvements to existing homes — such as improved HVAC units, windows, furnaces, and heat and water pumps — was extended through 2013. The law also updated the standards that such appliances would need to achieve to be eligible for the incentive.
- New Energy Efficient Homes Credit — The law extends through 2013 the tax incentive for the production of energy efficient homes. To be eligible, new homes must achieve a 30 percent or 50 percent improvement over heating or cooling energy usage of a comparable residence. The level of efficiency determines the value of the credit.
- Energy Efficient Appliance Credit — The tax credit for U.S.-manufactured, energy-efficient appliances was extended through 2013. This credit includes refrigerators, dishwashers and clothes washers.
Source : Lexology
[Update Dec 2010] President Obama has signed into law a bill that covers a $858 billion extension of all the bush-era tax cuts, plus some additional tax benefits. With this legislation he has essentially created a new 2011 Economic Stimulus package, that includes the following green energy tax breaks:
– Energy-Efficient new homes credit discussed in the update below has been extended through 2011.
– Biodiesel and renewable diesel – extends through 2011 the $1.00 per gallon production tax credit for biodiesel.
– Alternative fuels credit – extends through 2011 the $.50 (cents) per gallon alternative fuel tax credit.
– Ethanol – extends through 2011 the per gallon tax credits for ethanol. Includes existing $.54 (cents) tariff on imported ethanol.
– Energy Efficient Appliances – extends through 2011 tax credit for manufacturers of energy-efficient large appliances.
While the Senate debates more green energy bills (see update below), the IRS has provided more details on the 2 primary green energy rebates that allow homeowners to make energy-saving improvements this fall; that cut their winter heating bills and lower their 2010 tax bill as well.
Nonbusiness Energy Property Credit
This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.
By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2010 federal income tax return. Due to limits based on tax liability, amounts spent on eligible energy-saving improvements in 2009, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.
Residential Energy Efficient Property Credit
Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when figuring this credit. Also, except for fuel cell property, no cap exists on the amount of credit available.
Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer’s tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer’s website or with the product packaging. Normally, a homeowner can rely on this certification.
The IRS cautions that the manufacturer’s certification is different from the Department of Energy’s Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
Eligible homeowners can claim both of these credits when they file their 2010 federal income tax return. Because these are credits, not deductions, they increase a taxpayer’s refund or reduce the tax owed. An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure and claim these credits.
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[Previous Update]- 2010 Home Star Green Energy Retrofit $8,000 Rebates and Tax Credits to Make Your House Energy Efficient
The Senate has released more details on a new $6 billion energy stimulus package titled the Home Star Energy Retrofit Act of 2010 aimed at creating clean energy jobs and to promote residential energy efficiency programs. It is expected to save participating homeowners $200–500 per year in energy costs and provide various rebates (up to $8,000) and environmental benefits. The key provisions include:
$250–1500 Silver Star rebates. For the first year of the program, consumers can receive between $250 and $1500 in “point–of–sale” rebates for each retrofit involving individual energy efficiency measures, with a benefit not exceeding $3,000 or at least 50% of total project costs (whichever is less). Eligible energy efficiency measures include insulation, duct sealing, water heaters, HVAC systems, windows, doors, and cool roofs. Rebates will be targeted to the most energy efficient categories of upgrades, focusing on products primarily made in the United States. All retrofits must be installed by a certified contractor.
$3000 Gold Star rebates.For the first two years of the program, consumers interested in whole home retrofits would be eligible for up to $3000 “point–of–sale” rebate for a comprehensive energy audit and retrofits tailored to achieve a 20% energy savings in the home. Consumers can receive additional incentives for energy savings higher than 20%. The Gold Star rebate program would build on existing whole home retrofit programs (versus individual measures in the Silver star rebates program), such as EPA’s Home Performance with Energy Star program and DOE’s building programs.
$3000 performance tax credit. After the first year, consumers can receive tax credits for whole home retrofits that meet 100 HERS for buildings constructed prior to 2000, and 85 HERS for building constructed after 2000. Homeowners can receive up to $8000 in rebates or 50% of the total retrofit cost. These tax credits will be available until the end of 2013 and can be claimed when tax returns are filed.
Rebate process. Consumers are eligible for discounted prices of the installation of Silver Star measures at the point of sale. Upon job completion, contractors submit rebate requests to rebate aggregators, such as small independent building material dealers, large national home improvement chains ((e.g Home Depot or Lowe’s), merchants across the country, energy efficiency installation professionals and utility energy efficiency programs (including rural utilities) and then are reimbursed by the federal government.
Given contractor and vendor issues with past energy efficiency programs and stimulus tax credits, the new bill is also putting some more stringent qualification criteria around contractors. They need to be licensed and insured to install the retrofits. Licensing is enforced by the states according to federal guidelines.Independent quality assurance providers will be responsible for field audits after job completion in order to ensure proper installation and measurable energy savings for consumers
In total the The Senate bills (S3177, S3434) promoting this program, referred to as the Cash for Caulkers legislation, would offer rebates of as much as $8,000 to homeowners who retrofit with energy-efficient insulation, windows and heating and cooling equipment. The Home Star program to cut energy use from appliances and air conditioners would create as many as 168,000 jobs over the next two years, according to the Alliance to Save Energy, a Washington-based group the promotes energy efficiency.
The Senate legislation also offer rebates to people who buy gas- powered cars or trucks or convert conventional vehicles to gas. It also would give grants of as much as $50,000 to companies that put natural gas refueling stations into service between 2011 and 2015. The Senate bills have to be reconciled, then go back to the house and merged with the original house bill (HR 5019) before being sent to the President for approval of the program and payments.