2009 Federal Tax Incentives

The $700 billion Emergency Economic Stabilization Act, passed by Congress in October 2008, included legislation that resurrects residential tax credits previously available in 2006 and 2007. However, there are changes between the earlier tax credits and the 2009 version, so please read this information carefully and, as always, seek advice from your tax professional.

Federal Tax Credits Extended for Home Energy Improvements

Homeowners interested in making energy improvements between 1/1/2009 and 12/31/2009 should review these guidelines to see if their projects qualify for tax credits on federal income tax filings. (Improvements “put into service” in 2008 are ineligible.)

QUALIFIED BUILDING ENVELOPE COMPONENTS
Taxpayers can qualify for a tax credit equal to 10% of the amount paid to purchase the following qualified building envelope materials, with maximum amounts determined by specific categories. Credit is allowed only for amounts paid to purchase the components. Allowable amount does not include costs for on-site preparation, assembly or original installation of the components.

Insulation: Insulation material or system (including vapor barrier or seal to limit infiltration) that is specifically and primarily designed to reduce heat loss or heat gain of the dwelling and may be taken into account in determining whether the building’s thermal envelope meets International Energy Conservation Code (IECC) requirements.

Windows, Skylights and Exterior Doors: Exterior window, skylight or door (other than storm window or storm door) that meets or exceeds the IECC criteria established for the climate zone. Exterior windows and skylights that bear the Energy Star label, installed in the climate zone identified on the label, are considered eligible.

Storm Windows: Storm window that, in combination with exterior window over which it is installed, meets or exceeds IECC prescriptive criteria for the climate zone.

Storm Doors: Storm door that, in combination with a wood door assigned a default U-factor by the IECC, does not exceed the default U-factor requirement assigned to such combination by the IECC.

Roofs: Any metal roof that has appropriate pigmented coating specifically and primarily designed to reduce the dwelling’s heat gain and that also meets or exceeds Energy Star requirements.

QUALIFIED RESIDENTIAL ENERGY PROPERTY
Tax credits provided for purchase of qualified energy property, including heating and cooling equipment, water heating equipment, and photovoltaic systems for solar power generation. Installations costs are allowed in determining tax credits for property listed in this section.

Heating and Cooling Equipment:

$300 tax credit for a central air conditioner that achieves “residential tier 2” status established by the Consortium of Energy Efficiency, effective as of 1/1/2006. This is 14 SEER or higher for single package systems and 15 SEER or higher for split package systems. See:

$300 tax credit for an electric heat pump that has a heating season performance factor (HSPF) of at least 9, a seasonal energy efficiency rating (SEER) of at least 15 and an energy efficiency rating (EER) of at least 13.

$150 tax credit for natural gas, propane or oil furnace or a hot water boiler that achieves annual fuel utilization efficiency (AFUE) rating of not less than 95.

$50 tax credit for any advanced main air circulating fan that is used in a natural gas, propane or oil furnace and has an annual electricity use of no more than 2% of the total annual site energy use of the furnace.

30% of expenditures, up to a maximum of $2,000, for qualified geothermal heat pumps (ground or water source). The unit must meet Energy Star requirements. (Note: Shelby County does not permit drilling for a vertical loop ground source heat pump, so available options include a horizontal loop system, which requires more land surface, or a water source system, which routes pipes to a pond on the property for heat exchange.)

$300 tax credit for biomass stove that achieves a thermal efficiency of 75% and is used to heat a residence or heat water for use in the residence. Biomass fuel is anything from agricultural crops, trees, wood wastes and residues to pellets, plants, grasses and fibers.

Water Heating Equipment:

$300 tax credit for purchase and installation of a natural gas, propane or oil water heater that has an energy factor (EF) of at least 0.80.

$300 tax credit for an electric heat pump water heater that yields an energy factor of at least 2.0 in the standard DOE test procedure.

30% of qualified solar water heating system expenditures, with a maximum credit of $2,000.

Solar Power Generation:

30% of qualified photovoltaic (PV) property expenditures, with maximum credit for installations in 2009 through 2016. This covers PV panels, also called solar panels, installed at home for generation of electricity.

GENERAL TERMS and CONDITIONS

The component is installed in or on a dwelling located in the United State that, at the time of installation, is owned and used by the taxpayer as the taxpayer’s principal residence.

Improvements and systems must be placed in service between 1/1/2006 and 12/31/2007. Equipment and materials must be new when installed at the taxpayer’s home.

Manufacturers will provide a certification statement on packaging, website or in another manner suitable for taxpayer recordkeeping.

References to the International Energy Conservation Code (IECC) can be interpreted as either the 2001 Supplement of the 2000 IECC or the 2004 Supplement of the 2003 IECC.

The maximum amount of the credit allowed to a taxpayer for all taxable years, for all Building Envelope Components and Qualified Energy Property, is $500—unless otherwise noted. Taxpayers who claimed some but not all of the $500 federal income tax credit for energy efficiency home improvements that was in effect in tax years 2006 and 2007 may utilize the unused portion in 2009.

Solar water heating tax credits are considered separately, with a maximum of $2,000 per taxpayer household. Solar generation credits are also considered separate and have no maximum amount starting in 2009.

Other terms and conditions apply.

Consult a tax professional or the IRS for eligibility information on your specific home energy improvements.

Additional information is available through The IRS, Energy Star, ACEEE, CEE1 and EnergyTaxIncentives.org. See an updated summary matrix at here.

MLGW provides this summary as a service to customers interested in financial incentives for making energy efficiency improvements to their homes. MLGW makes no guarantee as to accuracy, completeness or applicability of information. Consult your tax adviser for specific advice