I wanted to share a few updates with readers on energy tax credits for renewable energy projects for both 2020 tax year filing and for 2021. Energy tax credits may not sound like the most exciting or inclusive topic, but there are 2 types of credits – one is very easily obtainable, while the other is more difficult, but potentially significant. Both types of energy tax credits were expanded and extended with the Consolidated Appropriations Act of 2021 passed by Congress in December of 2020.
2020 & 2021 Energy Tax Credits for Renewable Energy
The “Renewable Energy Tax Credit” can result in a significant credit of 26% of the costs of major renewable energy installations. These credits were expanded and extended with the Consolidated Appropriations Act of 2021. The Renewable Energy Tax Credit is unlimited (there is no cap), and includes labor on installations for the following:
- solar water heaters
- solar panels
- geothermal heat pumps
- small wind turbines
- fuel cells
Starting in 2021, eligible property also includes certain qualified energy-efficient biomass-fuel property.
Before the Congressional expansion, the Renewable Energy Tax Credits were set to phase out on the following schedule for residential installations:
- 2019: 30%
- 2020: 26%
- 2021: 22%
- 2022: 0%
Post expansion, the Renewable Energy Tax Credits phase out on the following new schedule:
- 2019: 30%
- 2020: 26%
- 2021: 26%
- 2022: 26%
- 2023: 22%
- 2024: 0%
The installations must be installed in a home you own and use as a residence (no rentals, but second homes qualify).
These energy tax credits are non-refundable, but can be carried-over to a future tax filing year. More information can be found on the Energy Star Renewable Energy Tax Credit site, which was not yet updated with information on the expansion of this credits at time of publish.
2020 & 2021 Non-Business Residential Energy Property Tax Credits (aka Energy Efficiency Tax Credits)
The very popular and easily obtainable non-business residential “Energy Property Tax Credit” for Energy Star certified energy efficiency improvements on principal residences was previously extended through 2020 by Congressional tax extender legislation and more recently extended through 2021 with the Consolidated Appropriations Act of 2021.
These popular residential energy efficiency tax credits equal 10% of the cost of product 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 or fans: $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%.
- Electric Heat Pump Water Heater: $300 with Energy Factor ≥ 2.2.
- Windows, Doors & Skylights: 10% of the cost, up to $500, but windows are capped at $200 (not including installation costs). Must be ENERGY STAR certified.
If you want to buy any of these types of products, it would be wise to focus on the above specs when doing so, so you are eligible for the tax credit. More info. can be found on the Energy Star site.
How to Claim the Energy Tax Credit:
2020 & 2021 Energy Tax Credits Discussion:
- Have or will you claim the Renewable Energy Tax Credit? Please share the cost, savings, and any other details of your project in the comments.
- Have or will you claim the Non-Business Energy Property Tax Credit? What project did you take on?