Energy Smart Tax Credits and Deductions
IRS Tax Credits for Spray Foam and Injection Foam Insulation
The Energy Policy Act of 2005 provides for specific tax credits tied to the use of certain energy efficient home improvements.
Homeowner Tax Credit for Insulation Home Improvements:
Tax credits are available to existing homeowners for many types of home improvements including adding insulation, replacement windows, and certain high efficiency heating and cooling equipment. The final rules and forms to clarify which products and services qualify for the tax credits will be developed by The Internal Revenue Service (IRS), and, in the meantime, the IRS has provided guidance for consumers, which can be found in the following notice:
IRS Notice for Home Improvement Tax Credits 2006-26
The purpose of this Technical Bulletin is to certify that Handi-Foam and Handi-Seal Polyurethane Foam products used as an insulation material qualify for the tax credit as an "Eligible Building Envelope Component" under section §25C of the Internal Revenue Code.
Business Tax Credit for New Homes.
The tax credit for the construction of new energy efficient homes is $2,000 per home, if the builder achieves a 50% reduction in projected energy use as compared to the 2004 International Energy Conservation Code with supplements. These tax credits apply to new homes located in the United States whose construction is substantially completed after August 8, 2005 and that are acquired from the eligible contractor after December 31, 2005 and before January 1, 2008, for use as a residence.
Business Tax Credit for Commercial Improvements.
The law permits an immediate tax deduction (versus Depreciation) for energy efficient commercial buildings meeting a 50% energy reduction. The deduction, generally $1.80 per square foot, but $0.60 per square foot in some cases, is effective for property placed in service between 2006-2007.
Additional information about this program can be found on the EPA's Energy Star® web site;
Just how has the new Stimulus bill affected the tax credits for energy efficient home improvements?
On February 17, 2009, President Obama signed a stimulus bill (The American Recovery and Reinvestment Act of 2009) that made significant changes to the energy efficiency tax credits. Here are highlights from this new wave of understanding how to use Green Foam insulation (and DoctorEnergySmart.com) to BIG ADVANTAGES in HEALTH,COMFORTABILITY And LOWER ENERGY BILLS.
The tax credits that are effective for 2009, have been extended to 2010 as well. The tax credit (homeowner cost deduction) has been raised from 10% to 30%. The tax credits that were for a specific dollar amount have been changed to 30% of the cost. The maximum credit has been raised from $500 to $1500 for the two years (2009–2010),yet some improvements such as solar water heaters, geothermal heat pumps and solar panels, are not subject to the $1,500 maximum.
The $200 ceiling cap on windows, has been removed.
UPDATED February 20, 2009
Federal Tax Credits for Energy Efficiency includes:
Please note, not all Green qualified homes and products qualify for a tax credit.
These tax credits are available for products rated at the highest efficiency levels, which typically cost much more than standard products. We consider that the energy efficient products now available on the market and professionally installed, (which may cost more to purchase than standard insulating choices) will pay you back in lower energy bills within a reasonable amount of time, even without a tax credit.
Tax Credits for Consumers:
Foam Insulation-30% of cost, up to $1,500
For insulation to qualify, its primary purpose must be to insulate.
(example: vapor retarders are covered, siding does not qualify).
Must be expected to last 5 years OR have a 2 year warranty
Tax credits are now available for home improvements:
must be "placed in service" from January 1, 2009 through December 31, 2010 to qualify only for taxpayer's principal residence.
The maximum amount allowable is $1,500 in 2009 & 2010 for most home improvements (geothermal heat pumps, solar water heaters, solar panels, fuel cells, and windmills are not subject to this cap) to collect tax credits, maintain good record keeping, save your receiptson your improvements made in 2009,they will be claimed on your 2009 taxes (they must be filed by April 15, 2010) — see IRS Tax Form 5695 (2009 version) — available late 2009 or early 2010
If you are building a new home, you can qualify for the tax credit for photovoltaics, solar water heaters, small wind systems and fuel cells, but not the tax credits associated with doors,windows, roofs, insulation, HVAC, or non-solar water heaters.
Congress Approves Large Tax Credit for Installed Insulation
Congress has approved the 2009 economic stimulus bill ("The American Recovery and Re-investment Act") which includes an expansion and extension of the current federal tax
credit for insulation installed in homes . The federal tax credit for installing insulation in 2009 and in 2010 will be 30% (previously 10%) of the purchase price up to a $1500 tax
credit. So a consumer can save up to 30% or as much as $1500 from the purchase price when adding (upgraded from original) insulation to their existing home.
Only the cost of the insulation material counts towards the credit according to the IRS.
How does a taxpaying homeowner qualify for the tax credit?
Qualified energy efficiency improvements are eligible for the 2009/2010 tax credit. A qualified energy efficiency improvement is an energy efficiency building envelope component such as insulation materials or systems which are specifically and primarily designed to reduce the heat loss or gain for a dwelling:
- that follow the prescriptive criteria of the 2009 International Energy Conservation Code;
- that is installed in or on a dwelling located in the United States and owned and used by the taxpayer as the taxpayer's principal residence;
- the original use of which commences with the taxpayer; and
- that reasonably can be expected to remain in use for at least five years.
The Act enables the tax credit to apply to energy efficient improvements placed in service between January 1, 2009, and December 31, 2010.
The $500 lifetime cap of the previous law is eliminated and replaced with an aggregate cap of $1,500 for property placed in service between January 1, 2009, and December 31, 2010.