Home Energy Tax Credit

There is a benefit of tax credits for home owners if they purchased some energy efficient products or home energy saving devices in the years 2006- 2007.

However, there is a limit of 500$ for all the tax years in which a maximum of 200$ can be for windows. This equal to a 10 % of what you have spent on windows. The house should be located in the US and these new windows should be purchased and used between January 1, 2006 and December 31, 2007.

These credits can be claimed only if certain energy efficiency rates are met which are specified by the law. Sometimes these rates are very tough to be met. Hence you need to check these specifications yourself while you buy a product and do not go buy a sales man’s word. For example a furnace which uses natural gas, oil or propane only will qualify for credits.

To avoid any conflict on qualification it is better to get a certificate from the manufacturer when you buy a product. It is not compulsory for a manufacturer to give such certificates but it is encouraged. This certificate should be given along with the product packaging or should be available on the website which can be taken as a print and can be used as reference. If your product has an energy star label, there is no need of any certificates. This label is valid all through the area that is specified in the label.

Home Energy Tax Credits - Energy Saving Requirements:

Home Energy Tax Credits, Energy star Home Energy Tax Credits
Energy Star

Energy efficient windows, insulation, roofs, doors, heating and cooling equipment are covered in these home energy systems.

If you buy and install any of such equipment you will be qualified for energy credits. This can be up to 1500$ if the equipment is installed before January 1, 2011.

Windows

Exterior windows, skylight and exterior doors, all the products has a 2000 year IECC (International Energy Conservation Code) requirement but if you have an energy star label on it then the product is qualified

For exterior windows and skylight, you will get 10% of cost up to $200 tax credits while for exterior door is 10% of cost up to $500

Metal Roofing

Require to have a energy star pigmented coating on it. You will get 10% of cost up to $500

Insullation

To have home energy tax credit, your insulation has meet 2000 IECC standard, then you will get 10% of cost up to $500

Central Air Conditioning

To meet the qualification efficient products you can check at www.ceehvacdirectory.org. If your product is there then you can get

Heat Pump

For Air source heat pump, it must have:

15 SEER and 13 EER - A category set by Consortium for Energy Efficient
And HSPF (heating seasonal performance factor) at least 9

The product has to have all those 2 category and beware, not all energy star labelled are qualified

For geothermal heat pump has to meet energy star requirements

The tax credit is up to $300 of the cost

Water Heater

If by electric, must have an EF at least 2.0, but if yours is by gas, oil or propane, the EF at least 0.80. To read more about the qualified products you can goto www.gamanet.org.

The tax credit is up to $300 of the cost

Furnace

Gas, oil or propane furnace or hot water boiler, has meet requirement of at least 95% of AFUE (annual fuel utilization efficiency. For a list of qualified products you can goto www.gamanet.org

The tax credit is up to $150 of the cost

Advanced Furnace Air Circulating Fan

The usage of the fan must not more than 2% of the total annual energy use of the furnace. For more information please goto www.gamanet.org

The tax credit is up to $50 of the cost

How to Gain Home Energy Tax Credits:

Home Energy Tax Credits

Example, if you have a new home and buy:

Windows at $2000
Tankless gas water heater at $2000

Assume all the products meet the home energy tax credit requirement and bought the products in 2006

So you will get tax credit from window $200 and from water heater $150. that's $350 in total. You will have left $150 ($500 max) to use in 2007

Solar energy:

Are you ready for solar energy? If a home owner uses solar water heaters or any other appliances which use solar power they get good credits at 30% of the cost and a maximum of 2000$ for each tax year.

And also goes the same on solar panel or other home energy saving devices that generate PV electricity.

However these solar equipment are forbid to use for heating the pool or hot tubs. These products have to install in your home between January 1,2006 to December 31,2007

Before installing these solar energy equipment you need to calculate how much saving you have and how long it will pay back your investment.

Not all the solar heating devices are beneficial and in this case, solar water heaters is a good investment and here is how you calculate:

The cost of solar water heater is ranging between $3500 to $6000, with a 30% tax credit (around $1050 to $1800), it sure pay you back quickly

Solar panel is another story, the cost of it around $16K to $64K depends on the house and with $2000 tax credit, it won't help much.

However, different states offer different percentage of tax credits some of which may be very beneficial. California state is rebating tax to 35% off installation while new jersey can take up to 60%. You can check if your state offers a good percentage you can opt for solar power at www.dsireusa.org

Another point which finds importance in deciding whether to go solar is that the number of years that are required to get the investment back using the credits. Sometimes it may be very fast in a few years and sometimes it may take over 20 years.

You can easily come up with solar cost estimation at www.findsolar.com

In summary of Home Energy Tax Credits:

tax payers who purchase home energy saving devices can claim any of the following tax credits:

The residential energy property credit: This refers to the credits available for those home owners if they do some specific improvements to their house which are energy efficient or purchase and use some energy efficient products in their house. This is valid if done in 2006 and 2007.

It can be up to 500$. This credit does not reduce the AMT and only offsets the tax payer’s tax liability. The credits cannot be carried over if the tax liability is not sufficient to make use of the full credit.

The residential alternative energy credit: In 2006 and 2007 an individual may claim a non- refundable residential alternative energy tax credit. This can be used to offset the excess tax liability over the alternative minimum tax. This cannot be used if the tax liability is below zero. In this case the unused credits can be carried over to the successive year and can be used. This credit covers the expenses incurred on the equipment that falls under the following category:

Solar water heaters that works on solar energy in households, photovoltaic equipment for power generation in the households and Qualified fuel cell property.

The credit is 30 % of the total expenditure incurred in solar water heaters and photovoltaic cells and a maximum of 2000$ can be claimed for each and a total of 4000$ for both per year. Fuel cell property credits can go up to 1000$ for each kilowatt hour capacity per year. The credit for this property does not have any cumulative limits.