Energy Efficiency Tax Credit
As part of the Economic Stimulus package, the American Recovery and Reinvestment Act of 2009 provides federal tax credits for eligible building components and labor to install those components that improve energy efficiency. The credit applies to improvements such as adding insulation, energy efficient exterior windows, energy-efficient heating and air conditioning systems, solar electric, solar water heating, wind, geothermal, and fuel cell.
There are two formal classifications of Federal Energy Tax Credit:
1. Section 1121 - Residential Energy Property Credit - The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010. Following are types of projects covered under Section 1121:
a) Insulationb) Energy efficient exterior windows
c) Energy-efficient heating and air conditioning systems
2. Section 1122 - Credit for Residential Energy Efficient Property - This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property. Following are types of projects covered under section 1122:
a) Solar electric. 30 percent of the qualified solar electric property expenditures made by the taxpayer during the taxable year;
b) Solar water heater. 30 percent of the qualified solar water heating property expenditures made by the taxpayer during the taxable year;
c) Fuel Cell Property: The lesser of-- 30 percent of the qualified fuel cell property expenditures made by the taxpayer during the taxable year; or $500 for each half kilowatt of capacity of the qualified fuel cell property to which the expenditures relate;
d) Geothermal Heat Pumps: 30 percent of the qualified geothermal heat pump property expenditures made by the taxpayer during the taxable year.
e) Wind Turbines: 30 percent of the qualified small wind energy property expenditures made by the taxpayer during the taxable year;
f) Labor Included Section 25D allows the credit for expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of residential energy efficient property described in section 3.01 of this notice and for piping or wiring to interconnect such property to the dwelling unit.