Goodway Presents: Watered Down Energy Tax Credits Extended in 2011

Goodway is pleased to present energy-related information and research to help keep you current.  

For those of you who were considering taking advantage of the home energy/energy-efficiency tax credits that were available during the last couple of years, we have both good news and bad news. The good news is that they are still around. The bad news is that they aren’t worth as much as they used to be.

Originally slated to disappear at the end of 2010, they have been given new life as part President Obama’s recent deal with Republicans to extend the Bush tax cuts in exchange for added unemployment benefits.

Before we review the highlights, here are a few caveats to keep in mind:   as before, the credits only apply to primary residences, so you won’t be able to use them to upgrade the heating in your condo in Aspen (unless of course, you live there — in which case, this writer could use a brief ski getaway!)   You still need to check with your contractor to make certain that any products you purchase are eligible for discounts, because in some cases, the standards have become more stringent.  If you used the tax credits to the tune of more than $500 any time since 2005, according to the National Association of Home Builders (NAHB), you cannot use them in 2011.

For products like windows, doors, insulation, etc., the credit has been reduced to a maximum of 10 percent of the value of parts only (no installation) up to a limit of $500. Within that $500, certain types of products are also capped.

For example, according to Darwin’s Money.com, Energy-star certified windows now yield a maximum credit of only $200.  So, if you buy $3500 worth of windows, your maximum credit will be $200, instead of the $1050 you would have been eligible for had you bought them last year.   If you buy a new furnace, it must now be 95% efficient to be eligible, versus the 90% rating that qualified in 2009-2010, and even then the credit is capped at $200.

Another aspect of these changes in the law is the extension of the New Energy Efficient Home Tax Credit — sometimes called the 45L credit, for the section of the tax code that describes it.  The NAHB says that the section 45L tax credit is the only federal incentive available relating to efficiency in new home construction. Roughly 10% of all new homes sold in 2009 qualified.

The program provides up to $2,000 in tax credits to builders and developers who build and sell homes that achieve a 50% improvement in energy efficiency over the 2004 International Energy Conservation Code.

It remains to be seen if these incentives will be sufficient to motivate Americans to continue buying products that will help conserve energy and reduce utility bills. And that, of course, begs this question: why isn’t a dramatic reduction in fuel costs alone enough to move people to invest in energy-efficient products?

Rich Silverman
Goodway Blogging Team

Public Domain Image by Mifter courtesy of Wikimedia Commons

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