From The Tax Incentives Assistance Project
February 17, 2009: Stimulus Package Extends, Enlarges Energy Efficiency Tax Incentives
Congress passed an economic stimulus package over the weekend that does much to promote energy efficiency. The American Recover and Reinvestment Tax Act of 2009 includes several provisions modifying and expanding the scope of the energy efficiency and renewable energy incentives. A few notable changes:
- Energy efficiency incentives for upgrades to existing homes have been extended, and are now available for 2009 and 2010.
- The financial cap for these incentives, which cover home envelope improvements as well as heating, cooling and water heating equipment, was increased to $1,500 (from $500).
- Lower caps, such as the $200 cap on new windows, have been abolished. The existing home incentives are now calculated at 30% of the cost of the installation, up to the $1,500 cap. The legislation is unclear on whether this includes both equipment and labor, however previous IRS rulings suggest that labor is NOT included.
- Standards for equipment eligibility have changed – see the individual topic pages under the Consumer tab for details (coming soon).
- On-site renewables (solar photovoltaic and hot water systems, small wind systems, and geothermal heat pumps) are now eligible for a tax incentive worth 30% of the total cost, without a cap.
- There are new incentives for plug-in electric vehicles, and plug-in conversion kits.
- Residential Energy Efficient Property: Form 5695
- New Homes: Form 8908
- Vehicle Incentives: Form 8910
- Commercial Solar Incentives: Form 3468 (Investment Credit)
Consumer Tax Incentives
Home Shell: Insulation, Windows, Sealing
What is the tax credit for existing homes?
Please note that these incentives have changed as of January 17, 2009. We are still working out all the details, so please bear with us as we decipher the new legislation.
Existing homes are eligible for a series of efficiency measures that pertain to the home envelope, worth 30% of the installed cost (materials only). There is a $1,500 cap on the credit per home, including the amount received for heating, cooling, and water heating equipment.
These credits are available for systems placed in service from January 1, 2009, through December 31, 2010.
What is eligible for the federal tax credits?
Eligible measures are:
- Added insulation to walls, ceilings, or other part of the building envelope that meets the 2009 IECC (& supplements) specifications.
- Replacement windows and skylights, and exterior doors which are equial to or below a 0.30 U factor and a Solar Heat Gain Coefficient (SHGC) of 0.30.
- Window films certified by the manufacturer that the product meets the requirements of a “qualifying insulation system.”
- Sealing cracks in the building shell and ducts to reduce infiltration and heat loss – these should be sealed so as to be consistent with the 2009 IECC.
- Pigmented metal roofs, or an asphalt roof with cooling granules must meet Energy Star requirements.
View IECC Climate Zones by state and county, and IECC 2004 Supplement Edition R-values and U-factors for insulation, windows, and doors (8MB PDF). Coming Soon – IECC 2009
Manufacturers and retailers should be able to help you tell whether a specific product qualifies.
What do I need to do to qualify for the incentives?
Under the IRS rules, manufacturers need to certify that specific measures are eligible. Homeowners should obtain a copy of this certification from the manufacturer, installer or retailer when buying these products. Certifications need not be submitted to the IRS, but should be kept on file in case the IRS has questions. Homeowners should also make notes on when each eligible measure is installed- only measures “placed in service” in 2009 or 2010 are eligible.
To apply for the incentive, use IRS form 5695.
Where can I find out more about qualifying products?
- Duct Sealing:
- Air Infiltration Reduction:
- Home Energy Ratings and Related Services:
- Information on Qualifying Roofs:
On-Site Renewables Tax Incentives
Solar Energy Systems
What are the tax incentives for solar systems?
Businesses are eligible for tax credits for qualified solar water heating and photovoltaic systems, and for certain solar lighting systems. Qualifying equipment will either use solar energy to generate electricity, to heat/cool or provide hot water to a structure, or will use solar energy to illuminate the inside of a building by means of fiber-optic distributed sunlight (tube systems and passive solar are not eligible). The credits are available for systems “placed in service” between January 1, 2006 and December 31, 2016.
Homeowners are eligible for tax credits for qualified solar water heating and photovoltaic systems. Solar water heating systems produce hot water, photovoltaic systems produce electricity. The credits are available for systems “placed in service” at any dwelling unit, not necessarily the primary residence, between January 1, 2006 and December 31, 2016.
Note: This is a basic guide to the credit. For more detailed information, go to www.seia.org and download the Guide to Federal Tax Incentives for Solar Energy, or click here for recent FAQs regarding the new legislation.
Who is eligible for the tax incentives?
The tax credits go to businesses that install solar equipment for their use, and to individuals who install qualifying systems on homes they use as a residence. (Note, unlike other consumer incentives, the dwelling does not have to be the taxpayer’s primary residence – rental properties, second homes are eligible)
In the case of cooperative apartment buildings owned by a corporation, SEIA states that “if the corporation spends money on installing qualified solar property, each shareholder is allowed to claim residential solar tax credits on his or her share of the spending.”
In the case of condominiums, SEIA reports that when the condominium management association “spends money on installing qualified solar property, each member of the association can claim the residential solar tax credits on his or her share of that spending,” so long as the management association qualifies as a homeowners’ association under the law, and the majority of the units in the condominium are used as dwelling units.
How do the incentives work?
The tax credits are for 30% of the cost of the system. For individuals the maximum credit is $2000 for photovoltaic systems and $2000 for solar water heating systems. Please note: Systems installed after December 31, 2008, are not subject to a cap. To qualify, residential systems must meet certain criteria as follows:
- Solar water heating:
- System must be certified for performance by the Solar Rating Certification Corporation (SRCC) or a comparable entity endorsed by the state government in which the system is located. SRCC is an organization set up by the solar industry to test and certify equipment so purchasers have an independent assessment of system performance.
- At least half of the energy used by the system to heat the water must be solar energy. The credit is not available for expenses for swimming pools or hot tubs.
- Photovoltaic systems:
- System must provide electricity for the residence, and must meet applicable fire and electrical code requirements.
Alternative Minimum Tax and the Residential Solar Tax Credit
According to SEIA, the new legislation passed in October of 2008 “allows individual taxpayers to use the credit to offset AMT liability, and to carry unused credits forward to the next succeeding taxable year.”
What do I have to do to qualify for these incentives?
To qualify, tax payers will probably need to have evidence regarding:
- the cost of the system (including labor and piping or wiring to connect the system to a home’s plumbing and/or electrical systems),
- when it was placed in service,
- whether the system meets the qualifying criteria discussed above.
For taxpayers installing solar PV or water heating systems at their residence, use the Residential Energy Efficient Property Form 5695. For corporate taxpayers, use Form 3468 for Commercial Solar Incentives (Investment Credit).
Where can I learn more about qualifying products?
Good sources of information about these systems include: