By Sean Lintow Sr.
Ok, I admit it, I had no clue and this is its 22nd year of it being observed. Obviously though I am not the only one, as one site that lists all the different â€œNational Fill in the Blank Monthâ€™sâ€ has over 30 listings just for October and not one of them is about energy. Ok, maybe the Auto Battery Safety Month deals somewhat with an energy source, but that is as close as we get. I think we may have a slight failure on the governmentâ€™s part here on getting the message out. Speaking of failing to get the message out, how about that $1500 tax credit for Energy Efficient upgrades? Most every homeowner I talk to has not heard about it or even if they have heard about it, they do not fully understand how it works. Please note: we at SLS Construction are not lawyers, accountants, or tax professionals and we strongly recommend you contact one of them if you have specific tax or legal questions.
What is a credit?
First, the $1500 energy tax credit is part of the ARRA of 2009. If a homeowner makes certain eligible energy efficient upgrades to their main residence during the 2009 and 2010 years, they can qualify to get a credit on their taxes. A tax credit is pretty cool as it counts as money paid in and reduces the amount you owe unlike a deduction, which only lowers your taxable income. A quick example â€“ let us say you make $40,000 this year; your federal tax owed would be $6,188. A deduction of $1500 would save you only $375 ($5813 still owed), while a credit would drop what you owe down to $4688.
Here is a nice little item for those of you that file married but filing separate â€“ you can actually double the credit. (i.e. one claims the roof, while the other claims the AC Unit upgrades)
Whatâ€™s the catch?
That sounds great, but what are these â€œeligibleâ€ upgrades and whatâ€™s the catch? Well letâ€™s break this up and deal with the eligible upgrades in the next section. The first catch is that even if you purchase multiple products you can only get a maximum of $1,500 over the entire 2-year period. If you get the entire $1,500 credit in 2009, then you cannot get anything additional in 2010. The second catch is installation costs are not included in some popular upgrades like window replacement or adding installation. Another catch is that you must fill out a special tax form and will need to get and keep a â€œManufacturers Certificateâ€ in case you are audited. The final catch is that it only covers 30% of the cost â€“ so to get the full $1500 you have to have invested a minimum of $5000 to perform the upgrades.
A quick reference chart of eligible upgrades
|Item||Qualified Products||Labor Inc?||For More Info|
|Insulation||You need to bring area up to 2009 IECC standards â€” insulated vinyl siding does not count||NO||Energy Star FAQ|
|Doorâ€™s, Windows & Skylights||After June 30th, it must meet the 30 â€“ 30 standard, both the U Factor & SHGC rating must be at .30 or below||NO||Energy Star FAQ|
|Storm Doors and Windows||When combined with the existing unit â€“ it must meet the 2009 IECC & the 30 â€“ 30 standard listed above||NO||Energy Star FAQ|
|Roofing â€“ Metal or Asphalt Shingles||Energy Star Rated â€” Roof Coatings do not count||NO||Energy Star FAQ|
|HVAC, Furnaces||Different requirments based on type||YES||Energy Star FAQ|
|Electric Water Heaters||Must meet Energy Star Requirments / Energy Factor greater than 2.0 â€” Electric Tankless or Storage Tank Water Heaters do not count||YES||Energy Star FAQ|
|Propane, Naturual Gas, Oil Water Heaters||Energy Factor must be greater than .82 or have a thermal efficency rating of 90%||YES||Energy Star FAQ|
Do Not Forget â€“ all items require a Manufacturers Certificate that it meets the Tax Credit Standard in case of an audit.
So is it for me, and any suggestions?
As for the first question, that is only a question you can answer. If you were planning on upgrading your AC, redoing your roof, etcâ€¦ in the next few years, it may be worth it to push it up. If you want the most bang for your buck, get an energy audit done â€“ it doesnâ€™t make much sense to replace your windows if your AC unit is 20 years old, or all that nice cool air goes straight out your attic.
But wait, thereâ€™s moreâ€¦
For additional tax credits related to Geo Thermal, Biomass, Solar, Wind, & Fuel Cells; EnergyStar Website
For additional information on policies, programs, or incentives offered by your local utility, local government, state government, or federal government that promote renewable energy and energy efficiency click here & choose your state; http://www.dsireusa.org/
For Business, Public Utilities, and Manufacturers there are some other tax breaks available also; http://www.energy.gov/additionaltaxbreaks.htm