Federal Tax Credits for Energy Efficiency
On October 3, 2008, President Bush signed into law the “Emergency Economic Stabilization Act of 2008.” This bill extended tax credits for energy efficient home improvements (insulation, HVAC,windows, doors, roofs and non-solar water heaters). Tax credits for these residential products, which had expired at the end of 2007, will now be available for improvements made during 2009.
Home improvement tax credits are now available for home improvements “placed in service” ( The IRS defines “placed in service” as when the property is ready and available for use ) from January 1, 2009 through December 31, 2009.
Any qualified home improvements made in 2008 are not eligible for the tax credit.
Home improvement tax credits are available for replacement windows, water heaters,insulation certain high efficiency heating and cooling equipment, and biomass stoves. The maximum amount that a taxpayer may claim from all of these tax credits combined is $500 over the lifetime of the tax credit (2006, 2007 & 2009).
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 for windows, doors, insulation, roofs, HVAC, or non-solar water heaters.
Efficient Cars
Starting January 1, 2009, there is a new tax credit for Plug-in hybrid electric vehicles, starting at $2,500 and capped at $7,500 for cars and trucks (the credit is based on the capacity of the battery system). The first 250,000 vehicles sold get the full tax credit (then it phases out like the hybrid vehicle tax credits).
Tax credits are available to buyers of hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. The tax credit amount is based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models.
These credits are available for vehicles placed in service starting January 1, 2006. For hybrid and diesel vehicles made by each manufacturer, the credit will be phased out over 15 months starting after that manufacturer has sold 60,000 eligible vehicles. For vehicles made by manufacturers that have not reached the end of the phase-out, the credits will end for vehicles placed in service after December 31, 2010.
Solar Energy Systems
Tax credits are available for qualified solar water heating and photovoltaic systems. The credits are available for systems “placed in service” ( The IRS defines “placed in service” as when the property is ready and available for use ) from January 1, 2006 through December 31, 2016. The tax credit is for 30% of the cost of the system, up to $2,000. After December 31, 2008, this $2,000 cap will be removed for photovoltaic systems (but not solar water heaters). This credit is completely separate from the $500 home improvement credit.
Small Wind Energy Systems
Tax credits are available to homeowners who install residential small wind turbine systems. The credits are available for systems placed in service from January 1, 2008 to December 31, 2016. The tax credit is for 30% of the cost of the system, up to $500 for each half kilowatt of capacity with an overall maximum of $4,000.
Fuel Cells
There is a consumer tax credit of up to 30% of the cost (up to $1,500 per 0.5 kW of capacity maximum) for installing a “qualified” fuel cell and microturbine systems. The credits are available for systems “placed in service” from January 1, 2006 through December 31, 2016. This credit is not limited to the $500 home improvement cap.
President-elect Barack Obama and Renewable Energy
President-elect Barack Obama, after consulting with Congressional Democrats, moved quickly to double his proposed tax credit for renewable energy in his fiscal stimulus package to $20 billion. The Obama Administration’s overall fiscal stimulus package is expected to total about $700-$850 billion.
Economist Peter Dawson told BloggingStocks:
“First, Obama, so far, is making good on his ‘all ideas considered’ philosophy. Congressional Dems wanted a renewable energy tax credit program that will help speed the development of solar and wind power, and $20 billion in 2009 will further that goal. So Obama’s collaborative decision making process is being deployed,” Dawson said
“Second, it sends a signal to renewable and traditional energy suppliers that ‘there’s a new sheriff in town’ and that renewable energy will not be given just lip-service,” Dawson said. “Renewable energy will now finally get the tax incentives it needs to develop these important technologies.”
Further, Dawson said energy policy provides “a good snapshot of Obama’s pragmatic, best-elements policy stance.”
“Obama knows oil as a primary energy source is not going away anytime soon, and it’s just not practical to think it won’t be used. But at the same time, he knows other energy sources, especially renewables, must displace oil in the U.S. for economic, national security, and environmental reason, so he’s moving aggressively to speed the arrival of that day,” Dawson said. “After eight years of energy policy stagnation, it’s a refreshing change in Washington and one oil companies need to pay attention to.”
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