More Tax Credit info...

Just in case the TERRA House opening inspires you to make some upgrades this year...

Federal Tax Credits Extended, Increased for Home Energy Improvements

There is no better time to make energy improvements to your home, given recent legislation that has expanded tax incentives for qualified residential energy efficiency upgrades. There are important changes between the earlier legislation and the regulations included in the American Recovery and Reinvestment Act, signed into law on 2/17/2009.

Homeowners interested in making energy improvements in 2009 and 2010 should review these new guidelines and consult a tax advisor to see if projects qualify for Residential Energy Efficiency Property Credits on federal income tax filings. The new household maximum tax credit amount is $1,500 (unless otherwise noted)—so now is the time to improve your home, as you will reduce monthly energy costs and cut your taxes!

QUALIFIED BUILDING ENVELOPE COMPONENTS
Tax credit equal to 30% of cost for qualified building envelope materials added to existing homes. (Legislation is unclear on whether the 30% is calculated from the total installed cost, or only the material purchase price. Earlier regulations addressed only the material purchase price, excluding labor.)

Insulation:
Insulation added to walls, attic and other parts of the building envelope that meets requirements of the 2009 International Energy Conservation Code (IECC) and supplements.

Windows, Skylights and Exterior Doors:
Replacement windows, skylights and exterior doors with a U-factor of 0.30 or below and a solar heat gain coefficient (SHGC) of 0.30 or below.

Duct Sealing and Air Infiltration Reduction:
Sealing of cracks in building shell and heating/cooling system ductwork to reduce infiltration and heat loss, to comply with 2009 IECC.

Roofs:
A pigmented metal roof, or asphalt roof with cooling granules, that meets or exceeds Energy Star requirements.

QUALIFIED RESIDENTIAL ENERGY PROPERTY
Tax credits equal to 30% of cost for qualified energy property, including heating and cooling equipment, water heating equipment, and photovoltaic systems for solar power generation. (Although legislation is unclear, it is assumed that calculations for qualified property are based on installed costs, as with earlier legislation.)

Heating and Cooling Equipment:
1. Central air conditioner that achieves the highest efficiency tier standards established by the Consortium of Energy Efficiency, effective as of 1/1/2009, http://www.cee1.org/resid/rs-ac/rs-ac-tax-credits.php3 This is typically 14 SEER or higher for single package systems and 16 SEER or higher for split package systems.

2.Electric air source heat pump achieves the highest efficiency tier standards established by the Consortium of Energy Efficiency, effective as of 1/1/2009, http://www.cee1.org/resid/rs-ac/rs-ac-tax-credits.php3 . This is typically a unit with a heating season performance factor (HSPF) of at least 9, a seasonal energy efficiency rating (SEER) of at least 16 and an energy efficiency rating (EER) of at least 12.5.

3. Natural gas or propane furnace that achieves annual fuel utilization efficiency (AFUE) rating of 95 or higher.

4. Natural gas, propane or oil boiler that achieves 90 AFUE or higher.

5. Advanced main air circulating fan for heating and cooling system that uses no more than 2% of total heating energy use.

6. Geothermal heat pumps (ground or water source) unit that meets 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.)

7. Biomass stove that achieves a thermal efficiency of 75%, as measured using a lower heating value, 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:
1. Natural gas, propane or oil water heater that has an energy factor (EF) of at least 0.82 or a thermal efficiency of at least 90%.

2. Electric heat pump water heater that yields an energy factor of at least 2.0 in the standard DOE test procedure.

3. Solar water heating system that is certified by the Solar Rating Certification Corporation (SRCC) or equivalent and produces at least half the energy used by the system to heat water. (Excludes solar water heating for swimming pools and hot tubs.) Tax credit is equal to 30% of installed system cost and is separate from the $1,500 household tax credit for building envelope and qualified energy property.

Solar Power Generation:
Installation of photovoltaic (PV) property qualifies for a tax credit equal to 30% of installed system cost, with no maximum credit for installations in 2009 through 2016. This covers PV panels, also called solar panels, installed for generation of electricity used at the home. This tax credit is separate from the $1,500 household tax credit for building envelope and qualified energy property.

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

2. Improvements and systems must be placed in service between 1/1/2009 and 12/31/2010. Equipment and materials must be new when installed at the taxpayer’s home.

3. Manufacturers will provide a certification statement on packaging, website or in another manner suitable for taxpayer recordkeeping. It is important to note that not all EnergyStar-certified products will qualify under these new regulations.

4. The maximum amount of the credit allowed to a taxpayer for all taxable years, for all Building Envelope Components and Qualified Energy Property, is $1,500 (increased from $500).

5. Solar water heating tax credits and solar generation credits are considered separate from the $1,500 household tax credit. The tax credit is equal to 30% of installed system cost, with no maximum amount beginning in 2009.

6. Other terms and conditions apply. Consult a tax professional or the IRS for eligibility information on your specific home energy improvements. To file, use IRS form 5695, Residential Energy Efficiency Property Credit, http://www.irs.gov/pub/irs-pdf/f5695.pdf

7. Additional information is available through www.irs.gov, www.energystar.gov, www.aceee.org, www.cee1.org and www.energytaxincentives.org. See an updated summary matrix at: http://www.energytaxincentives.org/uploaded_files/Tax_incentive09.pdf

8. These tax incentives were originally created as part of the Energy Policy Act of 2005, for improvements made in 2006-2007. Credits were not available in 2008, and then were re-introduced through the Emergency Economic Stabilization Act of 2008, for improvements made in 2009. The American Recovery and Reinvestment Act of 2009 is the most recent legislation affecting these tax incentives.

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 professional for specific advice. Additional information on household energy improvements is available at www.mlgw.com under the My Account and Energy Saving Tools sections.