What do the tax credits for energy efficiency and renewable energy mean for you? - Fine Homebuilding

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The Deans of Green

The Deans of Green

What do the tax credits for energy efficiency and renewable energy mean for you?

comments (5) March 12th, 2009 in Blogs

The economic stimulus bill signed into law this year extends and in some cases enhances tax credits for energy efficiency and renewable energy improvements in the home. 

Some of key provisions, recently highlighted by The Daily Green, include:

  • You can claim a tax credit of up to 30% of the cost of home energy efficiency improvements made in 2009, up to $5,000 in total costs, or $1,500. The credit applies to improvements such as the installation of insulation, energy efficient windows, and/or an energy efficient furnace, boiler, water heater, air conditioner, or biogas stove.
  • The Alliance to Save Energy, a nonprofit coalition of business, government, environmental and consumer leaders, points out that the tax credit can be applied to installation costs for heating and cooling equipment, but only product costs for windows, insulation, and other parts of the building shell.
  • The stimulus bill also removed the $2,000 cap on a tax credit, pegged to a 30% tax rebate, on installation of geothermal heat pumps, solar photovoltaic cells, and solar water heaters. The credit can be applied to installations done from 2009 through December 31, 2016. These appliances must meet Energy Star criteria.
  • A tax credit also can be applied against the cost of a fuel cell or small wind-turbine system. The credit covers up to $500 per 0.5Kw of capacity.
  • A tax credit is available for 30% of the cost of insulated garage doors installed on insulated residential garages in 2009 or 2010, according to GarageWowNow.com, a Web site sponsored by the garage door industry. The tax credit cap is $1,500. The qualifying criteria: the door's U-factor must be less than or equal to 0.30, even if the door contains windows; its perimeter must be able to control air infiltration; the door must be expected to remain in service for at least five years; and the garage must be part of the taxpayer's principal U.S. residence.

As more of these tax credits come to our attention, we’ll add them to the list.






posted in: Blogs, business, energy efficiency, green building

Comments (5)

Bill8607 Bill8607 writes: I have been looking into a ductless mini split heat pump. Most major brands have a few that qualify for the tax credits
Why is it that because of the federal tax guidelines that this year they have upped the seer & hspf ratings and become quite a bit more efficent? Or are the just playing with the numbers? Most of the literature I have read says that they have been using these products in Europe and Asia for at least 20 years, so why can't I find real data which compares these products against each other, certainly the Japanese, the French and the Germans have some type of 'consumer reports' rating agency, I would think.
Any comments or first hand knowledge of these ductless mini splits would be helpful.
Posted: 3:40 pm on May 2nd

mddesignhomes mddesignhomes writes: MFournier you are right, it is way more complicated than it needs to be. Up front it looks like the government is offering to help us afford to do the right thing ("build green"). In the end it will only help the people that can afford to pay for it up front and wait for later to reap the benefits of reduced taxes. Although this may not sound like the green thing to do, you will need to fill out some additional forms of course. Ultimately I don't believe that everyone who should benefit from these programs will.
Posted: 11:51 am on April 3rd

MFournier MFournier writes: Tax credits are a pain lead to confusing as to qualification requirements and they complicate the tax regulations that are already to complicated. We saw during the Obama cabinet appointment scandals that even very smart people often get it wrong. (I am giving them the benefit of the doubt that they made a mistake not that they intended to cheat I myself have been audited for under payment even though at the time I thought I was doing everything right and paying what was due.

One example In 2007 I took a Mass. Energy efficiency Tax credit For new Windows and a new heating system. I used turbotax to prepare my taxes the software included the tax credit but did not file the appropriate forms with my electronically filed return so I was audited. Then had to file a amended return that one also was sent back stating that the amount of the credit was $350 less then what turbotax had figured in the end I got less then 10% of the cost of the New windows and new heating system. But it cost me an additional $200 in tax preparation fees.

Also qualifying for tax credits does not always mean greater energy savings The heating system cost 20% more then a lower efficiency system that would not qualify for the credit (the system had to be 90% efficiency or better to qualify) The cheaper system still would have been better then the 30 year old system it replaced. And if I took the extra money and put it toward more insulation I would have saved more even if the heating system was not as efficient. But More insulation would not have qualified for the tax credit since I already met code requirements on insulation R-value. And the Mass tax credit only applied to Energy Star rated improvements like double pane low-E windows energy star water heaters and heating systems.

All said and done It was not worth the trouble and the tax credit did very little to help cover the added costs of energy smart improvements.

I better way is just offer direct rebates directly toward the purchase of the energy saving products. That way everyone qualifies it does not matter if it is new construction or a remodel. And you get the savings when the money is actually spent not at the end of the year when you file your taxes or based on your income.

Every time the government talks about solutions to anything they throw around income tax credits Tax credits for health care, tax credits for education, tax credits to stimulate the economy. Tax credits to promote green energy policies ENOUGH All READY address the problems directly not indirectly through the tax system that is already too complicated.

Just institute a flat % tax rate for everyone no deductions no credits. One single 5"x8" form. You earn X amount then pay X% for taxes. Done. No child credits no standard deductions no marriage penalties, no mortgage interest credits that those who rent don't get, and no tax free income or tax shelters. Everyone pays the same % of what they earn period how much simpler and fair can it get then that.

For those that worry about the poor paying too much and the wealthy too little we can just raise the amount you can earn before it is taxed but it would still be simpler then all this tax credit deductions and forms stuff. The way it is now the lower income levels give the government their money all year and then wait for them to give it back based on deductions and credits after they file their taxes. If they are going to give it back why not just don't take it to begin with. If your salary is under X level you pay no tax all income above X level you get taxed at a flat % rate. And it is the same for All, Rich or poor. And don't make any distinction as to how it was earned how many kids you decide to have or not have or how much your home costs or if you own or rent.
Why should someone who was responsible decided not to have more kids then they could afford to support who earns $20K per year pay more tax then someone who decided to have 6 kid who earns the same $20K. Are we trying to promote larger populations in a world of limited resources? Sounds a little backward to me.

Another one is the mortgage interest tax credit lets say again two people both making 20K/year If one saved and put down 30% on a $150K home the other bought a $150K house 100% financed. The person who managed to save 30% before buying a home (remember both earn the same 20K/year) pays more income taxes because they pay less interest on their mortgage in other words they are being penalized for being financially responsible. Is that what we want??

Many will say that it helps poorer people who could not afford the down payment buy a home. I disagree that this is the best way to do this. Even if the interest is tax deductible you still have to pay it all year before you get it back. There are plenty of other ways to help low income home owners without unfair tax regulations.
How about just offering responsible lending programs that have lower cost upfront that any person with a low income can qualify for then both 20K earners would get the same benefit based on income but the one who sacrificed to save 30% down will benefit even more with a smaller mortgage cost. We can help low income home buyers while still promoting personal responsibility.

Also I know we also give tax credits to businesses that open business in enterprise zones and in certain industries to promote investment in our economy and create jobs I say again why Tax credits? why not just give X amount upfront if a business is one we want to promote or creates jobs in a area in which we want to promote. I would think that would be more effective A capital investment in your company now is much better then a tax credit paid at sometime in the future.

And then also think of all the accounting expenses spent each year figuring out tax regulations by both businesses and the government at the other end. We waste tax dollars trying to figure out how much tax should be paid and who should get what tax credit or which deductions to give.
Under a flat tax it is simple you use simple accounting you simply figure out profit after direct expenses and you pay tax on the profit simple. Sure business still need to do accounting but they do not have to figure out thousands of pages of new tax laws every year. I do not know the cost every year but the fact that tax preparation is a multi-million dollar industry it must be a lot. Also what does the government pay every year to print the new tax laws and all the forms and processing these forms.

I do not claim to have all the solutions I am just throwing out suggestions for discussion. I just feel the Income tax system is not the solution for other problems. If we want to promote fiscal responsibility and growth we need to simplify the income tax system not add more regulations to it.

If we want to promote better energy policy and home improvement and building practices that save energy then do it with direct investments ether to those buying the products or reduce the cost with direct investment in the companies making or installing the products. Keep the tax system out of it. Now I know the government gets their money from taxes but why complicate it in the end tax credits are giving away money so why no just put it in the budget and pay it upfront not hide it in dubious tax credits.

Posted: 2:33 pm on March 14th

budnature budnature writes: I am an owner/builder that has been working on my house for a couple of years. Previously my understanding of some of the tax credits was that they were for "improvements" to an existing house. I have been trying to include as much energy efficient materials as we can afford. But I am wondering if I am able or will be able to apply for some of the tax breaks since it is a new house. Also we are not yet living in the house and wondering if the tax credits can pnly be applied for pnce we actually get the CO for the house and are actually living there? Any thoughts would be grateful.


Posted: 2:34 pm on March 13th

boogieWoogie boogieWoogie writes: Is the credit only applicable up to a certain income level? I thought i recall reading something about 2x the poverty line...

Posted: 6:58 am on March 13th

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