Federal Residential Energy Efficiency Tax Credit for 2009

Renewable energy and energy efficiency is the topic of discussion for many households in the United States. However, the costs associated with the new technology are often out of reach for most of us. I have done research and found several Federal tax incentives that our family qualifies for.  If you are planning to purchase high-efficiency heating, cooling and water-heating equipment in 2009, you could be eligible for a personal tax credit by taking advantage of the Federal Residential Energy Efficiency Tax Credit . I found this information very useful and I hope you will too.

One of the major costs of home ownership is the major appliances, like a water heater, a heating system, and aircondioning.  In many instances, the old appliances are inefficient and cost you extra money to operate them.  Today, there are many options for energy efficient appliances, but they can be expensive.  However, I have found a way to help with those costs.  If you are planning to purchase high-efficiency heating, cooling and water-heating equipment in 2009, you could be eligible for a tax credit by taking advantage of the Federal Residential Energy Efficiency Tax Credit . The credit applies to energy efficiency 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.  An overview of the information is stated below.

The dates for eligibility are as follows:

Date Enacted: 10/3/2008

Effective Date: 1/1/2009

Expiration Date: 12/31/2009

There are two categories: Building Envelope Improvements and Heating, Cooling, and Water Heating Equipment .  And further information can be found at:

http://www.dsireusa.org/library/includes/incentive2.cfm?Incentive_Code=US43F&State=federal¤tpageid=1&ee=0&re=1

After expiring on December 31, 2007, the credit was extended by The Energy Improvement and Extension Act of 2008 (H.R. 1424, Division B), and now applies to eligible equipment purchased between January 1, 2009 and December 31, 2009. Equipment purchased during calendar year 2008 is not eligible for the tax credit. In addition to extending the credit, H.R. 1424 modified the efficiency requirements for water heaters; removed the geothermal heat pump credit from 26 USC § 25C and moved it to 26 USC § 25D; and extended the credit to stoves that use biomass fuel and asphalt roofs with appropriate cooling granules.

Building Envelope Improvements
Owners of existing homes can receive tax credits of up to 10% of the cost of upgrading the efficiency of the building's envelope. Components eligible for the credit include:

• 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, asphalt roofs with appropriate cooling granules.

Credits for windows may not exceed $200, and the total amount of credits for building envelope measures and other qualified energy property outlined below must not exceed $500.

According to the website, improvements should be expected to remain in use for at least five years. Metal roofs and asphalt roofs must meet Energy Star requirements, and all other improvements must meet 2000 International Energy Conservation Code criteria, including supplements. In addition, manufactured homes conforming to Federal Manufactured Home Construction and Safety Standards also qualify.

Heating, Cooling, and Water Heating Equipment
Purchasers of qualified energy efficient property are eligible for tax credits up to the total expenditures on such property. The credit can also be applied to labor costs for assembly and original installation of this property. Eligible property and maximum credit amounts are as follows:

• electric heat pump water heaters: $300;
• electric heat pumps: $300;
• central air conditioners: $300;
• natural gas, propane or oil water heaters: $300;
• natural gas, propane or oil furnace or hot water boilers: $150;
• advanced main air circulating fans: $50; and
• biomass stoves that use “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”: up to $300.

Performance and quality standards for tax credit eligibility vary by technology. See 26 USC § 25C and H.R. 1424 above for details. Additionally, the Internal Revenue Service (IRS) has provided the following guidance relating to the credit: IRS Notice 2006-26 that can be downloaded at:

http://www.irs.gov/pub/irs-drop/n-06-26.pdf

Also helpful, IRS form 5695 explains the new tax deductions for 2008 and 2009, located at:

http://www.irs.gov/pub/irs-pdf/f5695.pdf

For more detailed information on qualifying energy efficient products, go to the Energy Star website located at:

http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#7

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