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Federal Tax Credits for Energy Efficiency


UPDATED September, 2011
Current Federal Rebate for 2011

Tax Credit Amount: 10% of the cost, up to $500

  • 10% up to $500 for insulation, roofs, and doors
  • Existing home and principal residence. New construction and rentals do not qualify.
  • Expires December 31, 2011

Insulation must meet 2009 IECC and Amendments. Rebate does not cover installation/labor costs. Do it yourself-ers can also get the credit. Typical bulk insulation products can qualify, such as batts, rolls, blow-in fibers, rigid boards, expanding spray, and pour-in-place. Using blown fiberglass insulation is one of the best methods of energy efficiency for the home. Proper insulation using this keeps rooms tightly sealed, as compared to the old standard of fiberglass sheets, or batts. Spray foam is the fiberglass industry's newest product that does not contain harmful chemicals. Though the cost of blowing fiberglass into wall cavities is 40% more than utilizing the traditional batts, using spray foam is up to 50% cheaper. The overall energy savings of the home will offset the higher insulation costs over several years.

Tax Credits for Home Builders:
  • Eligible contractors need to fill out IRS Form 8908 to get the tax credit. The IRS has provided the following guidance regarding the tax credits for constructing energy efficient new homes available under the Energy Policy Act of 2005:

  • IRS Notice 2006–27 provides guidance for the credit for building energy efficient homes other than manufactured homes.

  • IRS Notice 2006–28 provides guidance for the credit for building energy efficient manufactured homes.

Home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50% energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements. At least 1/5 of the energy savings must come from building envelope improvements. This credit also applies to contractors of manufactured homes conforming to Federal Manufactured Home Construction and Safety Standards. Tax credits are now available for home improvements:

There is also a $1,000 tax credit to the producer of a new manufactured home achieving 30% energy savings for heating and cooling over the 2004 IECC and supplements (at least 1/3 of the savings must come from building envelope improvements), or a manufactured home meeting the requirements established by EPA under the ENERGY STAR program.

Please note that, with the exception of the tax credit for an ENERGY STAR qualified manufactured home, these tax credits are not directly linked to ENERGY STAR. Therefore, a builder of an ENERGY STAR qualified home may be eligible for a tax credit but it is not guaranteed.

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 for use as a residence from January 1, 2006 through December 31, 2009.
Tax Deductions for Commercial Buildings:
A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. These tax deductions are available for systems "placed in service" from January 1, 2006 through December 31, 2013.

For more information, please see our page titled Commercial Buildings Tax Deductions in this same Tax Credit section.
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