Tax Incentives for Energy Efficiency
If you purchase an energy-efficient product or renewable energy system for your home, you may be eligible for a federal tax credit. On February 17, President Obama signed into law the American Recovery and Reinvestment Tax Act of 2009. This bill extends and modifies the tax credits for windows, doors, and skylights established in the Energy Policy Act of 2005. The following guidance is not intended as legal advice, and you should consult a tax professional with specific questions.
Purchases that qualify the tax credit include: energy-efficient doors and windows, insulation, air conditioners, furnaces, heat pumps and boilers.
These purchases made between January 1, 2009 and December 31, 2010 are eligible for a tax credit equal to 30 percent of the product cost. There is a lifetime cap of $1,500 for the credit. That means if you spend $5,000 on new windows this year and claim a $1,500 tax credit on your 2009 tax return, you won't be able to claim an additional credit in 2010.
This is a more generous credit than the one that was available in 2006 and 2007, which covered 10% of the costs, up to a lifetime cap of $500. The old credits also contained individual caps, such as a $200 limit on new windows. With the new credits, you can claim 30% of all your energy-efficient costs, up to the lifetime cap.
For windows, doors, insulation and other similar projects that tighten up the "shell" of your home, the credit is limited to the cost of materials. However, if you buy a new air conditioner, furnace, heat pump or boiler that meets the energy-efficient guidelines, you can include the cost of installation in calculating the credit.
Only improvements to your primary residence qualify for the credits. Windows, doors, insulation, and roofs must be expected to last at least five years (a two-year warranty is sufficient to demonstrate this).
In addition, taxpayers who are subject to the alternative minimum tax will be able to claim the credits!
Hybrid Tax Break- The economic stimulus package also contained a provision that could expand the number of taxpayers eligible for a tax break on hybrid vehicles. Taxpayers who purchase an IRS-certified hybrid — a vehicle that combines an electric motor with a gas engine — are eligible for tax credits ranging from $250 to $3,000, depending on the type of vehicle. Once a manufacturer has sold 60,000 hybrid vehicles, the credit phases out and gradually disappears. Toyota and Honda hybrids are no longer eligible for the tax credit.
Businesses (and, indirectly, governments and nonprofit groups) also can get the tax credit for purchasing hybrid and diesel vehicles. Businesses have similar credits for geothermal heat pumps, solar equipment, and fuel cells. Tax deductions for efficient commercial buildings and for combined heat and power systems are available to businesses as well.
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