If you follow news about the political world or energy industry, you likely saw a flurry of headlines at the end of 2015 when Congress extended the wind and solar tax credits that were set to expire. Many in our industry considered this news because of the huge impact it will have on the renewables market (and because Congress actually agreed on something).
But what barely registered as a blip on the radar could have a very direct impact on everyday Americans, too.
As part of the tax extender bill that Congress passed and President Obama signed, two important energy efficiency tax credits (25C for existing homes and 45L for new homes) were also extended through 2016.
If you’re thinking about any home energy improvements (insulation, energy efficient windows or appliances) in 2016, this is just one more reason to go for it. And if you did any work in 2015, don’t forget the credits when you file your taxes this year.
This is a summary of the Residential Energy Efficiency Tax Credit, affecting purchases January 1, 2015 through December 31, 2016.
Building Envelope Improvements
Owners of existing homes may receive a tax credit worth 10% of the cost of upgrading the efficiency of the building’s envelope. Installation (labor) costs are not included and the credit is capped at $500 for all improvements. The following improvements are eligible for the tax credit:
- 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 – 2016 Equipment must meet version 6.0 Energy Star program requirements.
- Pigmented metal roofs designed to reduce heat gain, and asphalt roofs with appropriate cooling granules, which are Energy Star certified.
Heating, Cooling and Water-Heating Equipment
Taxpayers who purchase qualified residential energy-efficient property may eligible for a tax credit. The credit is equal to the full cost of the equipment up to the following caps:
- Advanced main air circulating fan: $50
- Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150
- 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”. Systems must have a thermal efficiency rating of at least 75 percent to qualify: $300