In order to gain passage in the House of Representatives the recent financial bailout bill included $150 in additional “sweeteners.” These sweeteners included energy efficiency and renewable energy tax credits. According to an article on the TheDailyGreen.com by Dan Shapley, the new tax bill “is filled with important incentives that will keep the solar and wind power industries competitive, and that means they should continue to innovate, producing more power at ever more affordable prices.” There are also several provisions that homeowners and other regular taxpayers can take advantage of.
Shapley offers the following six provisions found in the bill:
1. $500 for energy efficiency
If you can, wait until Jan. 1 to install new insulation, energy-efficient windows or an energy-efficient furnace, boiler or air conditioner.
A tax credit of up to $500 that expired in 2007 has been renewed for 2009. It covers up to 10% of the cost of a range of projects that meet certain specifications. Do $5,000 worth of qualifying work, and you not only get a $500 rebate, but also savings on energy bills for years to come.
Why wait? Of course, the heating season begins before Jan. 1, giving homeowners facing a northern winter reason to invest now - but because Congress let the tax credit lapse, work done in 2008 doesn’t qualify.
Also note these important limits, which cap the amount you can claim for any particular project:
- Windows: $200
- Exterior doors, roofing or insulation: $500
- Most heating, ventilation and air-conditioning improvements: $300
- Furnaces or hot water heaters: $150
Remember, your overall tax credit is capped at $500, so if you install $5,000 worth of exterior doors and $2,000 worth of new windows, for a total of $7,000, you can still only claim $500 - even though 10 percent of all qualifying work equals $700. Also, the tax credit applies only to equipment, not labor.
Find more information at the Alliance to Save Energy or Energy Star or Department of Energy web sites. Note that much of this information reflects the tax incentives in place in 2006 and 2007; for the most part, the 2009 tax credits are identical, but updated criteria for which products qualify, for instance, will be published soon.
2. $2,000 for geothermal
The new tax breaks include a new incentive to install ground-source heat pumps, according to Ronnie Kweller, spokeswoman for the Alliance to Save Energy.
The old credits had been capped at $300 and were included under the overall energy efficiency improvement cap of $500. No longer. Now you can claim up to $2,000 of the cost of installing a geothermal heating and cooling system, and the cost is separated completely from other energy-efficiency improvements you might claim. Like the energy-efficient tax breaks, however, this incentives doesn’t apply to work done in 2008.
Ground-source heat pumps are installed underground and use the constant 50-degree subsurface temperature to cool air or water in the summer, and heat it in the winter - both of which reduce the cost of heating or cooling year round.
3. $2,000 or more for solar power systems
The bill extends for another eight years a tax credit that covers 30 percent of the cost of new photovoltaic solar power systems on homes.
The existing tax credit, which was capped at $2,000, would have expired at the end of 2008. Now, it’s good through 2016 - and there’s no longer a dollar cap on the 30 percent rebate.
4. $500 or more for a fuel cell or microturbine
The tax incentive that had covered 30 percent of the cost of fuel cell or microturbine systems in homes, which lapsed in 2008, has been restored for 2009 and through 2016. It covers up to $500 per 0.5 kw of capacity.
5. $7,500 for plug-in hybrid cars
The first 250,000 buyers of plug-in hybrid vehicles now qualify for a $7,500 tax rebate.
A similar tax credit for hybrid vehicles had been capped at $3,500.
Keep an eye out for new incentives from your state, since the bill also authorizes an $800 million government bond program that encourages states to create incentives for new and existing energy conservation and related programs. Some of that money is likely to be used toward state tax breaks and other incentives that will vary by location.