Individual Energy Tax Incentives
Q. I heard there are new federal tax breaks for making energy-saving improvements to my home. I want to replace some storm windows. What can I claim on my tax return?
A. The American Recovery and Reinvestment Act of 2009 contains a number of new tax incentives energy-saving expenses that benefit individuals. Here's a summary of the eco-friendly provisions in the new law.
Significantly, the 2009 law raises the residential energy credit from 10 percent to 30 percent. For example, if you install new insulation in your home costing $1,000, you can claim a $300 credit (up from $100 under prior law). In addition, the lifetime $500 dollar cap that was in effect under prior law is eliminated, replaced by an annual limit of $1,500. The changes are effective for installations after 2008 and before 2011.
The enhanced credit covers a wide range of expenses in the home, including the following:
- Insulation materials,
- Exterior windows (including skylights),
- Exterior doors,
- Central air conditioners,
- Natural gas, propane and oil water heaters or furnaces,
- Hot water boilers,
- Electric heat pump water heaters,
- Certain metal roofs,
- Biomass stoves, and
- Advanced main air circulating fans.
The new law also removes the dollar caps for solar hot water property, geothermal heat pumps and wind energy property in homes. However, a $500 cap is imposed on qualified fuel cell property costs.
Although plug-in electrical vehicles are not commercially available to consumers yet, the new law modifies the existing rules. The base amount of the credit for qualified plug-in vehicles is set at $2,500. The full amount of the credit will be reduced once a manufacturer sells 200,000 units.
This is just a brief overview of the energy tax incentives for individuals. Your tax adviser can provide more guidance.