The 2009-2010 tax credit for energy efficient home improvements has come to a close as of December 31, 2010 and a new inferior package is taking its place. The 2009-2010 packages allowed homeowners to claim up to 30% of the cost of qualified home improvement, up to $1,500. The new provision has drastically reduced the tax incentive.
The tax credit has been reduced to 10% of the cost of qualified home improvements up to $500. Of that $500, some individual items have their own maximum allowance. Water heaters, for instance have limit of a $300 tax credit. Other limitations include the fact that the home to be improved must be an existing home and a primary residence. This means that new constructions and rental properties are excluded.
These tax credits will not be available for anyone that made use of the previous tax incentive programs from 2005-2008 or 2009-2010. Anyone that previously claimed an energy efficient home improvement tax credits totaling more than $500 is also excluded from taking part even if you have moved to another residence.
There is a pretty extensive list of the products and improvements eligible for the tax credits. However, the individual consumer must be careful because there are many limitations for specific products. Some of them are listed below;
Energy Efficient Windows and Doors: The installation cost is not eligible but the doors or windows themselves are if they meet the EnergyStar rating standards. Windows have a $200 credit limit.
Water Heaters: Here installation is covered. The max credit for an energy efficient water heater is $300.
Insulation: Whether it is spray foam, blow-in cellulose or fiberglass, it’s all covered. Installation costs however, are not.
Efficient Air-Conditioning and Heating Units: Installation is covered here but the limit the unit plus installation is $300.
As you can see some of the tax credits include installation and some do not. It seems to be a fairly random choosing either way, so be careful.
Also important to remember is that any work performed or items put into service after January 1, 2011 will not be claimed until 2012 with one notable exception. That means that just because you purchased it in 2010, if it wasn’t installed until 2011 it will fall under the substantially less generous 2011 package.
Since the tax credit has been greatly reduced many speculate that the market for such goods and services will be heavily impacted. This has caused some consternation amongst business folks in the industry. By reducing the tax incentive while the country is still recovering from economic woes could sharply reduce demand, which may reduce research and development and fold some of the smaller “green” vendors.
The tax incentive package for energy efficient improvements for 2011 seems more of a token gesture than real support for green technology going forward.