Energy Tax Credits

The US Government Can Help You Save Money and Energy

Posted by Richard Schabb | Sep 01, 2009
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The American Government has, in recent years, taken a proactive stance towards saving energy. Along with encouraging energy conservation in the commercial and industrial sectors of the economy, Congress has passed a series of laws that reward energy conservation in the residential market, particularly aimed at home owners. While many people rightly feel that these steps should have been taken many years ago, it's much better late than never, and taking advantage of these incentives is not only good for the environment and the world, it can also be a serious benefit to your bank account.

The current Federal law that continues many of the consumer tax incentives originally introduced in the Energy Policy Act of 2005 and the Emergency Economic Stabilization Act of 2008 is known as the American Recovery and Reinvestment Act of 2009. This bill extends the tax credits for energy-efficient existing homes for 2009 and 2010, and includes a couple of new categories to be covered by tax incentives. The measure covers purchases starting January 1, 2009, and continues through December 31, 2010.

Consumers who live in an existing home and who purchase and install products which are approved for inclusion in the program, such as energy-efficient windows, insulation, doors, roofs, and HVAC equipment, can receive a tax credit for 30% of the cost of the equipment and installation, up to a limit of $1,500, for these improvements. Tax credits are now also being offered on energy-efficient biomass fuel stoves, a new class of energy efficient equipment eligible for a consumer tax credit of $300. The American Recovery and Reinvestment Act of 2009 also clarifies the efficiency standard for water heaters.

Additionally, the Act rewards consumers who install solar water heating and energy generation systems, small wind powered energy systems, geothermal heat pumps, and residential fuel-cell and micro turbine power generation systems with a 30% tax credit for systems placed in service before December 31, 2016; the $1,500 tax credit cap no longer applies to these technologies, which can be quite costly. These alternative power generating systems are also very heavily subsidized by States such as Colorado, Texas, New Jersey, Oregon, New York, and a few others, making the installation of these systems much more affordable. For instance, the State of New Jersey and participating utilities will contribute up to $16,000 towards the cost of a rooftop solar power generating system. This represents about 60% of the cost of the system, which is estimated to save $800 to $1,500 annually in electricity. There is also a provision for selling excess generated electricity back to the utility, making the payback on the homeowner's investment occur even faster.

Many of the eligible products that qualify for use in home improvement projects that can generate tax credits are certified under the Federal Government's Environmental Protection Agency's Energy Star program, which can also qualify in some States for sales tax exemptions as well as manufacturer's rebates.

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