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What are the Home Energy Efficiency Improvement Tax Credits?
In 2005 the United States introduced the Energy Policy Act of 2005. This allowed homeowners to get tax credits for home improvements that improved the home's energy efficiency. We took advantage of some of these tax credits and were sad to see them expire in 2008. Fortunately the American Recovery and Reinvestment Act of 2009 extended some of these credits, increased some of the credits and added some new ones. The best part of all of this is that they extended some of these tax incentives to 2016! Now we can all do our part to live a greener life and reduce our tax bill doing it.
These tax credits can make a huge difference in the amount of taxes you pay because a credit reduces your tax bill dollar for dollar, whereas a deduction lowers your tax bill by a percentage of the total. What exactly qualifies for these tax credits? If you are interested in making your home more energy efficient there are many things you can do that will qualify you for these tax credits. If you replace your windows, doors, roof or heating and air conditioning units with energy efficient ones you will qualify for a tax credit for 30% of the cost, up to $1500. If you add insulation in your attic or walls you can take the credit as well. These improvements need to be completed between January 1, 2009 and December 31, 2010. Check EnergyStar.gov for complete lists of what qualifies.
The renewable energy tax incentives are the longest ones available, as you can benefit from them through December 31, 2016. With the Energy Policy Act of 2005 there was a cap as to the amount you could receive as a credit. With the new tax incentives the cap has been removed. You can now receive a credit of 30% of the cost to install solar energy systems, small wind systems, geothermal heat pumps, and residential fuel cell and micro turbine systems. Many states offer tax incentives of their own, making expensive environmentally friendly systems much more affordable. Our local newspaper had an article recently stating that people could ultimately save about 50% of the cost of solar panels between the state and federal tax credits. This makes the payback time for these systems much shorter.
There are also many automobile tax incentives available through December 31, 2010. The rules and regulations on these vary depending on many things, making this one more confusing than the other tax credits. If you purchase, or have purchased recently, a hybrid vehicle, a vehicle that runs on alternative fuels or an electric vehicle there are credits that you may qualify for. One of the variables is how many the manufacturer has sold, because the more they sell the less the credit is. It is confusing, but definitely worth checking to see if you qualify.
I love that the government is supporting homeowners in their efforts to be more energy efficient and live a greener life. The tax credits available through the Recovery and Reinvestment Act of 2009 will really benefit the environment and the home owner.