What do I need to know about federal energy-related income tax credits for 2011? I understand they’ve changed since last year.
The tax credits available this year have been cut back significantly from what was available last year. The tax bill passed by Congress in December modifies and extends three energy efficiency federal tax credit programs for homeowners, homebuilders and manufacturers.
Most significantly, the bill reduced the total amount of lifetime credits a homeowner may claim against federal income taxes from $1,500 to $500.
As well, installing insulation and duct sealing this year will qualify homeowners for a tax credit equal to 10 percent of the cost, up to a maximum cost of $500. The incentive was cut from 30 percent with a $1,500 maximum.
And the credit for installing furnaces that are at least 95 percent efficient was cut to $150, while the windows credit was reduced to $200. Taxpayers who have taken credits that exceed $500 in previous years would not qualify for credits for efficiency upgrades this year.
Still worth it
Be that as it may, the tax credits still exist in modified form and should appeal to home-owners who have not used the program. Credits can be applied to energy efficiency improvements in an existing home, as well as those purchased in a new home.
The program works like this: Homeowners who purchase qualified residential energy-efficient items — for example, a heat pump or high-efficiency gas furnace — can receive a credit against what they owe in federal income tax the next year.
The credit cap on an electric heat pump is $300. A natural gas, propane or oil furnace rated at 95 or greater in annual fuel utilization is capped at $150.
But there are limits on each item, so be sure to do your homework before making a purchase.
The legislation, according to the Tax Incentives Assistance Project Web site, also extends the new-homes tax credit, which goes to the builder not the buyer. This $2,000 credit is only available for homes that meet strict efficiency requirements.
Appliance credits
The bill also extends and updates manufacturer appliance tax credits for 2011. This credit, extended for one year, gives manufacturers a direct credit for increasing energy efficiency in everything from dishwashers to refrigerators, clothes washers to freezers.
Separately, windows with an Energy Star efficiency rating now qualify for a manufacturer’s tax credit.
Where to learn more
Sorting out tax credits from rebates and incentives can take time. The Tax Incentives Assistance Project Web site at http://energytaxincentives.org/ is designed to help consumers make use of the federal tax incentives.
Unfortunately, there is a lot of out-of-date material floating around on the Internet. So be sure you’ve got the latest updates before making an energy-efficient investment.
The Energy Adviser is written by Clark Public Utilities energy counselors, who provide conservation and energy use information to utility customers. Send questions to energyadviser@clarkpud.com or to Energy Adviser, in care of Clark Public Utilities, P.O. Box 8900, Vancouver, WA 98668. Past topics are available at http://www.clarkpublicutilities.com.
