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Energy Tax Credits
Energy Tax Credit Information

Contractors who build new energy-efficient houses can claim a new tax credit worth up to $2,000 for homes that are substantially complete starting the day President Bush signs the bill into law.


Cleveland Building Commissioning

 

 

Important Notice:

Most of the tax credits have been extended. Follow the link below to see current status and expiration dates for energy tax credits.

To See Current Tax Credit Status for Both Residential & Commercial Energy Tax Credits Click Here.

Tax Credit for Commercial Buildings:

A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. These deductions are available for buildings or systems placed in service from January 1, 2006, through December 31, 2007.

Tax Credits for Homeowners (see table below):

Taxpayers can claim tax credits totaling $500 in 2006 and 2007 for money spent on existing homes to upgrade heating systems, insulation, windows, doors and thermostats, caulk leaks, install pigmented metal roofs and otherwise cut energy waste.

Write-offs for replacement windows are capped at $200, however, while the credit for high-efficiency central air-conditioning, heat pumps and water heaters is capped at $300.

C.L.I. will be able to perform energy analysis (certification) for the upcoming 2006 Tax Credits. The analysis will be able to be rated after January 1, 2006. If you are considering updates to your home for tax credits, please contact our office for further information or to arrange to have an analysis performed. The tax credits are complicated and may require the advice of your tax consultant.

Tax Deductions Must Be Certified

Energy Efficient Home Credit IRC Sec. 45L and List of Eligible Software Programs for Certification

For a homebuilder to qualify for the New Energy Efficient Home Credit under IRC Sec. 45L, they must receive a certification that the dwelling unit has met the energy savings requirements of Sec. 45L. An eligible certifier must use an approved Software Program to calculate the dwelling unit’s energy consumption for purposes of Sec. 45L.  Sec. 45L provides a $2,000 credit for a traditional free-standing home and either a $1,000 or $2,000 credit for a manufactured home depending on the level of energy savings achieved.

IRS Notice 2006-27 (Section 5) and Notice 2006-28 (Section 6) provide for the Service to create and maintain a list of software programs that have been accepted by the Service for use in computing energy consumption for the purpose of certifications under Sec. 45L.  An accepted software program will appear on the above list when the software developer submits the following information to both the IRS and RESNET.

  1. The name, address, and telephone number of the software developer;
  2. The name or other identifier of the program as it will appear on the list;
  3. The test results, test runs and the software program with which the test was conducted;
  4. A declaration by the developer of the software program, made under penalties of perjury, that the software program has satisfied all tests required to conform to the software accreditation process prescribed in RESNET Publication No. 05-001 (Nov. 17, 2005).

 

Eligible Software Programs

Application

Vendor

Contact

Website

EnergyGauge® USA version 2.5 Florida Solar Energy Center Tei Kucharski EnergyGauge
REM/Rate v.12.2 Architectural Energy Corporation David Roberts, P.E. Architectural Energy Corporation
MICROPAS7 v7.1 Enercomp, Inc. Ken Nittler and Robert Scott MICROPAS
Builder Energy Solutions Calculator Owens Corning Dwight Shuler Owens Corning

Tax Credits for Home Builders:

Home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50 percent energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements. At least 1/5 of the energy savings must come from building envelope improvements. This credit also applies to contractors of manufactured homes conforming to Federal Manufactured Home Construction and Safety Standards.

There is also a $1,000 tax credit to the producer of a new manufactured home achieving 30 percent energy savings for heating and cooling over the 2004 IECC and supplements (at least 1/3 of the savings must come from building envelope improvements), or a manufactured home meeting the requirements established by EPA under the ENERGY STAR program.

 

SUMMARY OF TAX CREDITS FOR HOMEOWNERS

Product Category Product Type Tax Credit Specification Tax Credit Notes
Windows & Doors Exterior Windows and Skylights U factor <= 0.30

SHGC <= 0.30
30% of cost, up to $1,5002 Not all ENERGY STAR labeled windows and skylights qualify for tax credit.
Storm Windows Meets IECC1 in combination with the exterior window over which it is installed, for the applicable climate zone 30% of cost, up to $1,5002 Manufacturer Certification Statement3 will list classes of exterior window (single pane, clear glass, double pane, low-E coating, etc.)4 that a product may be combined with to be eligible in specific climate zones.
Exterior Doors U factor <= 0.30

SHGC <= 0.30
30% of cost, up to $1,5002 Not all ENERGY STAR doors will qualify.
Storm Doors In combination with a wood door assigned a default U-factor by the IECC1, and does not exceed the default U-factor requirement assigned to such combination by the IECC 30% of cost, up to $1,5002  
Roofing Metal Roofs,
Asphalt Roofs
ENERGY STAR qualified 30% of cost, up to $1,5002 All ENERGY STAR labeled metal and asphalt roofs qualify for the tax credit.

Must be expected to last 5 years OR have a 2 year warranty.

Insulation Insulation Meets 2009 IECC & Amendments 30% of cost, up to $1,5002 For insulation to qualify, its primary purpose must be to insulate. (example: vapor retarders are covered, siding does not qualify).

Must be expected to last 5 years OR have a 2 year warranty

HVAC Central A/C Split Systems:
EER >=13
SEER >= 16

Package systems:
EER >= 12
SEER >= 14
30% of cost, up to $1,5002 For a list of qualified products, go to the Consortium for Energy Efficiency product directory Exit ENERGY STAR, click on the Air Conditioners and in the “CEE Tier” enter “Residential Advanced Tier 3.”

Note — not all ENERGY STAR products will qualify for the tax credit.

ENERGY STAR Spec:

Split Systems:
EER >= 12 SEER >= 14.5

Package systems:
EER >= 11 SEER >= 14

Air Source Heat Pumps Split Systems:
HSPF >= 8.5
EER >= 12.5
SEER >= 15

Package systems:
HSPF >= 8
EER >= 12
SEER >= 14
30% of cost, up to $1,5002 Note — not all ENERGY STAR products will qualify for the tax credit.

ENERGY STAR Spec:

Split Systems:
HSPF >= 8.2 EER >= 12 SEER >= 14.5

Package systems:
HSPF >= 8 EER >= 11 SEER >= 14

Natural Gas or Propane Furnace AFUE >= 95 30% of cost, up to $1,5002 For a list of qualifying products go to the Gas Appliance Manufacturing Association Exit ENERGY STAR

Not all ENERGY STAR products will qualify for the tax credit.

ENERGY STAR Spec:

Gas Furnaces: AFUE >= 90

Oil Furnaces: AFUE >= 85

Boilers: AFUE >= 85

Oil Furnace AFUE >= 90 30% of cost, up to $1,5002
Gas, Propane, or Oil Hot Water Boiler AFUE >= 90 30% of cost, up to $1,5002
Advanced Main Air Circulating Fan No more than 2% of furnace total energy use 30% of cost, up to $1,5002 For a partial list of qualifying products go to the Gas Appliance Manufacturing Association Exit ENERGY STAR
Geo-Thermal Heat Pump Geo-Thermal Heat Pump Same criteria as ENERGY STAR:

Closed Loop:
EER >= 14.1
COP >= 3.3

Open Loop:
EER >= 16.2
COP >= 3.6

Direct Expansion:
EER >= 15
COP >= 3.5

30% of the cost - NOT subject to $1,500 cap All ENERGY STAR labeled geo-thermal heat pumps qualify for the tax credit.

Use IRS Form 5695 PDF Exit ENERGY STAR

Must be “placed into service” between Jan. 1, 2008–Dec. 31, 2016.

Water Heaters Gas, Oil, Propane Water Heater Energy Factor >= 0.82
or a thermal efficiency of at least 90%.
30% of cost, up to $1,5002 Not all ENERGY STAR gas storage and gas condensing water heaters will qualify for the tax credit. All ENERGY STAR gas tankless models will qualify.

ENERGY STAR criteria:

Gas Storage:
Energy Factor >= .62

Gas Tankless:
Energy Factor >= 0.82

Gas Condensing:
Energy Factor >= 0.8

For a partial list of qualifying products go to the Gas Appliance Manufacturing Association Exit ENERGY STAR

Electric Heat Pump Water Heater Same criteria as ENERGY STAR: Energy Factor >= 2.0 30% of cost, up to $1,5002 All ENERGY STAR qualified electric heat pump water heaters qualify for the tax credit.
Biomass Stove Biomass Stove Stove which burns biomass fuel5 to heat a home or heat water.

Thermal efficiency rating of at least 75% as measured using a lower heating value.

30% of cost, up to $1,5002  
Solar Energy Systems Solar Water Heating At least half of the energy generated by the “qualifying property” must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household.

The credit is not available for expenses for swimming pools or hot tubs.

The water must be used in the dwelling.

The system must be certified by the Solar Rating and Certification Corporation (SRCC).

30% of cost, up to $2,000 Use IRS Form 5695 PDF Exit ENERGY STAR

Must be placed in service before December 31, 2016.

Photovoltaic Systems Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement. 30% of cost Use IRS Form 5695 PDF Exit ENERGY STAR

Must be placed in service before December 31, 2016.

Small Wind Energy Systems Residential Small Wind Energy Systems   30% of the cost Must be placed in service by December 31, 2016.

Use IRS Tax Form 5695 (version 2009). This form should be available in late 2009 or early 2010.

Not limited to $1,500 cap.

Fuel Cells Residential Fuel Cell and microturbine system Efficiency of at least 30% and must have a capacity of at least 0.5 kW. 30% of the cost, up to $1500 per .5 kW of power capacity Must be placed in service by December 31, 2016.

Use IRS Tax Form 5695 (version 2009). This form should be available in late 2009 or early 2010.

Not limited to $1,500 cap.

Cars 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 models There is a 60,000 vehicle limit per manufacturer before a phase-out period begins. Toyota and Honda have already been phased out. Credit is still available for Ford, GM and Nissan.

For more information visit: Fueleconomy.gov Exit ENERGY STAR

Use IRS Form 8910 PDF Exit ENERGY STAR for hybrid vehicles purchased for personal use.

Use IRS Form 3800 PDF Exit ENERGY STAR for hybrid vehicles purchased for business purposes.

Plug-in hybrid electric vehicles   $2,500–$7,500 The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits).

Effective January 1, 2009.

1Either the 2001 Supplement of the 2000 International Energy Conservation Code or the 2004 Supplement of the 2003 International Energy Conservation Code.

2Subject to a $1,500 maximum per homeowner for all improvements combined.

3A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

4Additional information on exterior window features may be viewed at Anatomy of an Energy Efficient Window.

5Biomass Fuel means any 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.

The IRS defines “placed in service” as when the property is ready and available for use.

Efficient Cars

Starting January 1, 2009, there is a new tax credit for Plug-in hybrid electric vehicles, starting at $2,500 and capped at $7,500 for cars and trucks (the credit is based on the capacity of the battery system). The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits).

Tax credits are available to buyers of hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. The tax credit amount is based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models. These credits are available for vehicles placed in service starting January 1, 2006. For hybrid and diesel vehicles made by each manufacturer, the credit will be phased out over 15 months starting after that manufacturer has sold 60,000 eligible vehicles. For vehicles made by manufacturers that have not reached the end of the phase-out, the credits will end for vehicles placed in service after December 31, 2010. See the IRS Website for updated information Exit ENERGY STAR.

 
 

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