Sitting on the fence about energy efficiency home improvements? Don’t expect the government to push you over in 2011. Maybe a nudge. A tap on the shoulder perhaps. Regardless, it’s your money in the first place, so it’s worth trying to get some of it back. Just don’t expect the kind of “Green Love” D.C. has been showing you in the past two years.
Nonbusiness Energy Property Tax Credits
In general, energy efficient home improvement tax credits have decreased drastically with the recent tax law changes. From 2009-2010, building envelopment improvements (those that reduce heat loss or gain, such as windows, skylights, roofing, insulation, and doors, etc.) provided the home owner with tax credits of up to 30% of material costs.
Qualified energy property improvements (think mechanical equipment: hot-water heaters, heat pumps, central air-conditioners, etc.) gave tax credits of up to 30% of installed costs. The caveat: the aggregate amount could not exceed $1,500 for both years (you couldn’t reap the rewards for being green in 2009, then come back for a second helping in 2010).
In 2011, credits are capped at $500 for BOTH building envelopment AND energy property improvements, SINCE 2006. That’s right: if you’ve claimed more than $500 in the last five years, no credits for you in 2011. Building envelopment improvements are capped at 10% of materials cost, up to $500. Windows, exterior doors, and skylights have been cut even more, to a maximum of $200 in credits.
Qualified energy property credits have also gone down, but here’s just a highlight of the more popular items. Credits are based on installed cost, not to exceed the following caps:
- Air circulating fan: $50
- Natural gas, propane, or oil furnace, or hot water boiler with a fuel utilization rate of 95% (up from 90% in 2010): $150
- Biomass stove or wood-burning stove: $500
- Electric heat pump water heater (at least a 2.0 energy factor): $300
- Natural gas, propane, or oil water (with energy factor of at least 0.82 or a thermal efficiency of at least 90%): $300
- Central air conditioner (highest efficiency tier): $300
Energy Efficient Tax Credits for Appliance Manufacturers
With a few exceptions, appliance manufacturer tax credits have been extended this year for dishwashers, refrigerators and clothes washers; however, the energy requirements are becoming stricter. In general, the consumer can’t take advantage of these credits (check your state), but do benefit through lower prices and promotions. Take advantage of the upcoming stricter Energy Star requirements. Look for outgoing, less efficient models. When I say “less efficient,” keep in mind that we’re talking about miniscule amounts here: you’ll still be doing the environment some good.
Do the research if you plan to buy energy efficient appliances this year. For example, dishwashers: Look for better deals on models manufactured in 2008, 2009, and 2010. For these models, manufacturers got $75 credit for dishwashers using no more than 307 kWh/year and 5 gallons per cycle. On the same 2011 models, manufacturers will only get $25. This 307 kWh/year will be the new Energy Star level on July 1, so there should be some good deals on outgoing Energy Star models.
A tip on energy efficiency: you’ll save about $6 per year for every 30 kWh/year.
So go green in 2011, just try to lighten the hue. Not so much a bold Forest, but a nice shade of Sea Foam.
Sources: Bourgeois, M., Breaux, K., Chiasson, M., & Mauldin, S. (2010). Tax Incentives of Going Green. CPA Journal, 80(11), 19-24. Retrieved from EBSCOhost. windowanddoor.com; dsireusa.org; windowworldmadison.com
(photo by heymarchetti)