Ask the Ladies -- Save on Your Energy Bills

Wednesday April 19th 2006, 5:12 pm
Filed under: Personal Finance

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2006 is a great year for making your home more energy efficient. Under new legislation, the Energy Policy Act of 2005 (EPACT) enables consumers who install qualifying products, such as heating and cooling equipment, doors, energy efficient windows, and insulation, to receive a tax credit of up to $500.

In order for consumers to qualify for the tax deduction, the products must have an Energy Star label or meet the International Energy Conservation Code (IECC). As well, consumers must install the products in their primary residence. The amount of refund varies between $50 and $500, depending on the product. This tax credit applies to improvements made from January 1, 2006 through December 31, 2007.

Note: Not all Energy Star products qualify. The tax credit appears to be reserved for only those with the highest energy saving rating.

Product CategoryProduct TypeTax Credit SpecificationTax CreditNotes

ENERGY POLICY ACT OF 2005 DRAFT SUMMARY OF TAX CREDITS FOR HOMEOWNERS¹ (US Treasury has not yet provided final interpretation for IRS use)
Windows & Doors	Exterior Windows and Skylights	ENERGY STAR qualified OR meets IECC¹	10% of cost, up to $200² for all windows, skylights and storm windows	All ENERGY STAR labeled windows and skylights qualify for tax credit. Installation costs are not included. Learn more about ENERGY STAR qualified windows and skylights.
	Storm Windows	Meets IECC¹ in combination with the exterior window over which it is installed, for the applicable climate zone	10% of cost, up to $200² for all windows, skylights and storm windows	More clarification will be available soon. Check back. Manufacturer’s Certification Statement³ required.
	Exterior Doors	Meets IECC¹	10% of cost, up to $500²	ENERGY STAR doors will almost always qualify, except for certain parts of California⁴. Installation costs are not included. Learn more about ENERGY STAR qualified doors. Manufacturer’s Certification Statement³ required.
	Storm Doors	In combination with a wood door assigned a default U-factor by the IECC¹, and does not exceed the default U-factor requirement assigned to such combination by the IECC	10% of cost, up to $500²	More clarification will be available soon. Check back. Manufacturer’s Certification Statement³ required.
Roofing	Metal Roofs	ENERGY STAR qualified	10% of cost, up to $500²	All ENERGY STAR labeled metal roofs qualify for the tax credit. Must be expected to last 5 years OR have a 2 year warranty. Installation costs are not included. Manufacturer’s Certification Statement³ required.
Insulation	Insulation	Meets 2000 IECC & Amendments	10% of cost, up to $500²	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 Installation costs are not included. Manufacturer’s Certification Statement³ required.
HVAC	Central A/C	EER 12.5/SEER 15 Split Systems EER 12/SEER 14 Package systems	$300²	For a list of qualified products, go to the Consortium for Energy Efficiency product directory , click on the Air Conditioners and in the "CEE Tier" enter "Residential Tier 2." Note - not all ENERGY STAR products will qualify for the tax credit. The ENERGY STAR specification is: EER 11.5/ SEER 14 Split systems EER 11/SEER 14 Package systems Manufacturer’s Certification Statement³ required.
	Air Source Heat Pumps	HSPF 9 EER 13 SEER 15	$300²	Note - not all ENERGY STAR products will qualify for the tax credit. The ENERGY STAR specification is: HSPF 8.2 EER 11.5 SEER 14 Split systems HSPF 8 EER 11 SEER 14 Package systems Manufacturer’s Certification Statement³ required.
	Geo-Thermal Heat Pump	Same criteria as ENERGY STAR: EER 14.1 COP 3.3 Closed Loop EER 16.2 COP 3.6 Open Loop EER 15 COP 3.5 Direct Expansion	$300²	All ENERGY STAR labeled geo-thermal heat pumps qualify for the tax credit. Manufacturer’s Certification Statement³ required.
	Gas, Oil, Propane Furnace or Hot Water Boiler	AFUE 95 for both furnaces and boilers	$150²	For a list of qualifying products go to the Gas Appliance Manufacturing Association Note - not all ENERGY STAR products will qualify for the tax credit. The ENERGY STAR specification is: AFUE 90 for furnaces AFUE 85 for boilers Manufacturer’s Certification Statement³ required.
	Advanced Main Air Circulating Fan	No more than 2% of furnace total energy use	$50²	For a list of qualifying products go to the Gas Appliance Manufacturing Association Manufacturer’s Certification Statement³ required.
Water Heaters	Gas, Oil, Propane Water Heater	Energy Factor 0.80	$300²	Only some tankless water heaters currently qualify. This is about 20 percent more efficient than the current federal standard.For a list of qualifying products go to the Gas Appliance Manufacturing Association . Manufacturer’s Certification Statement³ required.
Water Heaters	Electric Heat Pump Water Heater	Energy Factor 2.0	$300²	This is more than twice as efficient as the current federal standard. Manufacturer’s Certification Statement³ required.
Cars	Cars	Hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles	Based on a formula determined by vehicle weight, technology, and fuel economy compared to base year models	Guidance for auto manufacturers is available from IRS. There is a 60,000 vehicle limit per manufacturer before a phase-out period begins. Consumers who buy from companies that already sell large numbers of qualifying vehicles will experience a relatively short "window of opportunity" for the credits.
Solar Energy Systems	Solar Water Heating	At least half of the energy generated by the "qualifying property" must come from the sun. Homeowners may only claim spending on the solar water heating system property, not the entire water heating system of the household. The credit is not available for expenses for swimming pools or hot tubs. The water must be used in the dwelling. The system must be certified by the Solar Rating and Certification Corporation (SRCC).	30% of cost, up to $2,000
Solar Energy Systems	Photovoltaic Systems	Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirement.	30% of cost, up to $2,000
Fuel Cells	Fuel Cells	Efficiency of at least 30% and must have a capacity of at least 0.5 kW.	30% of the cost, up to $1000 per kW of power that can be produced

¹Either the 2001 Supplement of the 2000 International Energy Conservation Code or the 2004 Supplement of the 2003 International Energy Conservation Code.

²Subject to a $500 maximum per homeowner for all improvements combined.

³A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

⁴The California counties where ENERGY STAR qualified doors may not qualify are: Alpine, Lassen, Modoc, Mono and Plumas.

Helen McIntosh is the author of this article and an avid green energy advocate. For more information about renewable energy and energy saving tips view her website Green Energy Help.

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