Due to the Tax Relief Act of 2010, the tax credit for residential energy efficiency improvements has been amended and extended through December 31, 2011. This means that tax credits for energy efficiency improvements to the building envelope and energy efficient heating, cooling and water-heating equipment of existing homes are still available. The credits apply to only U.S. taxpayer homes used for their primary residence. These credits can be applied for the following items:
Building Envelope Improvements
- 10% of the cost of upgrading the efficiency of the building's envelope
- Insulation materials and systems designed to reduce a home's heat loss or gain
- Exterior doors and windows (including skylights) --- no more than $200 in total credits can be claimed for windows in years 2006 - 2011
- Pigmented metal roofs designed to reduce heat gain, and asphalt roofs with appropriate cooling granules.
Heating, Cooling and Water-Heating Equipment
- Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150
- Advanced main air circulating fan: $50
- Electric heat pump water heater with an energy factor of at least 2.0: $300
- Electric heat pump which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
- Central air conditioner which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
- Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300
- Biomass stoves that use "plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers": $300
Unfortunately, in 2011 the tax credits have changed from those that were available in 2009 - 2010. In a nutshell, the total amount of the credit has been reduced:
For purchases made in 2009 or 2010: Aggregate amount of credit for all technologies placed in service in 2009 and 2010 combined is limited to $1,500.
For purchases made in 2011: Aggregate amount of credit is limited to $500. Taxpayer is ineligible for this tax credit if this credit has already been claimed by the taxpayer in an amount of $500 in any previous year.
The cap pertains to the total amount of credits a homeowner may claim from 2006 to 2011 -- not just in 2011. If a homeowner has already claimed $500 or more under this credit, the homeowner may not claim an additional credit for improvements made in 2011.
In other words, if you have already taken $500 or more in energy efficiency tax credits in the past 5 years, you are not at liberty to claim additional credits in 2011. If you have not yet taken advantage of these tax credits since 2006 (or they amount to less than $500), then your new energy efficient upgrade may qualify for a tax credit. An example of this would be if you replace your furnace in 2011. The upgrade must fall within the energy efficiency standards (models with annual fuel utilization of 95 or greater). The maximum tax credit allowed for furnaces is $150. Your credit may reflect the full $150 if your tax credits thus far amount to less than $350 (totaling $500).
Bear in mind this information is only an overview of the financial incentives. It is not intended as professional tax advice. For more detailed information on eligibility and requirements, the Database of State Incentives for Renewables and Efficiency provides a thorough review of the current program.
