2016 Energy Tax Credits
There are two types of energy tax credits, and there is good news on both fronts. With the congressional budget deal extender tax breaks, the popular residential property energy tax credit (aka the “home energy tax credit”) was retroactively applied to 2015 and proactively extended through 2016. These were the same energy credits that were retroactively applied to 2014, with some slight modifications. This year, there’s no waiting until end of year to see if you’ll retroactively get the credit, which is good news for consumers.
Additionally, the larger and unlimited 30% tax credits for solar received an extension, expanding the horizon for which you can install and take advantage of this huge tax credits.
Here are more details on each…
2016 Residential Property Energy Tax Credits (aka “Home Energy Tax Credit”)
The forward extension through 2016 for the residential property energy tax credit is great news for those looking to make any energy related home improvements, because you actually have the full calendar year ahead to make informed purchases and get the tax credit versus making the purchase (or more likely, not making any purchase at all) and then crossing your fingers for another extension.
Note: energy tax credits are nonrefundable, however, still a great benefit because they allow you a dollar-for-dollar drawdown on taxes owed.
These popular residential energy tax credits equal 10% of the cost up to $500, or a specific amount from $50–$300 for the following eligible items:
- Biomass Stoves: $300 credit for stoves with an efficiency of 75%+.
- HVAC Air Circulating Fan: $50 for fans that use less than 2% of a furnaces energy.
- Central Air Conditioning: $300 for Split Systems: with SEER ≥ 16 and EER ≥ 13, or package systems with SEER ≥ 14 and EER ≥ 12.
- Gas, propane, or oil hot water boiler: $150 with AFUE ≥ 95.
- Natural gas, propane, or oil furnace: $150 with AFUE ≥ 95.
- Insulation: 10% of the cost, up to $500 (not including installation costs). Includes air sealing caulk, spray foam, house wrap, and weather stripping.
- Roofs: 10% of the cost, up to $500 (not including installation costs) on metal roofs with appropriate pigmented coatings and asphalt roofs with appropriate cooling granules that also meet ENERGY STAR requirements.
- Gas, Oil, or Propane Hot Water Heater: $300, in the case of a storage water heater (20-55 gallons), an energy factor of at least 0.82 or a thermal efficiency of at least 90%. In the case of any other water heater, an energy factor of at least 0.90 or a thermal efficiency of at least 90%.
- Electric Heat Pump Water Heater: $300 with Energy Factor ≥ 2.0.
- Windows, Doors & Skylights: 10% of the cost, up to $500, but windows are capped at $200 (not including installation costs). Must be version 6.0 ENERGY STAR qualified.
Note that it can’t be any old product off that list – each must satisfy certain energy efficiency requirements to be eligible for the credit. More on those requirements can be found on the Energy Star Energy Tax Credit site.
30% Energy Tax Credits in 2016
The significant 30% tax credits on higher cost renewable energy installation projects that were set to expire in 2016 have also been extended (for solar only).
Three of these installation projects have no upper limit and include installation costs on primary and secondary homes (excludes rentals):
- geothermal heat pumps (30% credit goes through 2016).
- solar: includes photovoltaic and solar water heaters (30% credit goes through 2019, but decreases to 26% for tax year 2020; drops to 22% for tax year 2021).
- small wind turbines: residential only and no more than 100 kW (30% credit goes through 2016).
Another (fuel cells) has a cap of up to $500 per 0.5 kW of power capacity and only principal residences apply (installation costs are also included):
- fuel cells: efficiency of at least 30% and capacity of at least 0.5 kW (full 30% credit through 2016).
All must meet strict Energy Star requirements in order to be eligible for the tax credit.
2016 Energy Tax Credits Discussion:
- With the announced extensions, will you be making an energy efficiency related purchase in 2016?
- Have you or will you take advantage of the 30% energy installation project tax credit? Please share the costs and details in the comments.