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EPS Industry Advisory

 Federal Tax Law Extends Incentives for Energy Efficiency 

The massive Federal Tax Bill, signed into law on December 17, 2010, extended the tax credit available for energy efficient new homes and existing home retrofits but not without changes.  Although the New Energy Efficient Home Tax Credit for builders was extended without modification, the Existing Home Retrofit Tax Credit for homeowners was reduced from a maximum of $1,500 to $500; retrofit total expenses are still set at $5,000 to achieve the maximum credit.

The New Energy Efficient Home tax credit is available to new residential construction that uses no more than 50% of the energy of a home that met the minimum requirements of the 2003 model energy code.  Since the inception of the program in 2005, new homes qualifying for the credit have increased from less than 1% to 12% of new homes constructed in 2009.  In order to qualify, the home must meet the inspection guidelines established by the National Renewable Energy Laboratory.

Whether the credit is sought for a New Energy Efficient Home or an Existing Home Retrofit, the taxpayer must comply with the requirements and submit the appropriate IRS tax forms. The Energy Tax Incentives Assistance Project and American Council for Energy Efficient Economy are both excellent resources.

In separate legislation, Congress and President Obama revived the Nonbusiness Energy Tax Credit which does provide a credit of up to $1,500 for energy efficient retrofits. The Nonbusiness Energy Property Tax Credit, which expired in 2007, was reinstated in 2010.  The revival of this earlier program  balances out to some extent the reduction of the tax credit available under the Home Retrofit Tax Credit program and permits a claim for a credit of up to 30% to a maximum of $1,500 for certain energy efficient features, including insulation materials put into service in 2010. 

The Federal Government is not the only source of incentives, credits and deductions for energy upgrades.  The Department of Energy maintains an extensive source of State, Local and Municipal incentive programs, the Database of State Incentives for Renewables & Efficiency, which provides an interactive resource to identify government programs offering incentives for energy efficient construction and upgrades. This searchable database is an excellent resource.