New Rules for Federal Energy Efficiency Tax Credit

Keith

The tax credits known as 25C are extended through 2011, but at a significantly reduced value and with changes made to some of the qualifying equipment standards. The new tax credits begin on January 1, 2011 and last through December 31, 2011. The main difference is an eligible homeowner can claim 10% of the costs for the installation of qualified energy efficient improvements, capped at $500.

Under the new law the max a homeowner could claim on equipment is:

* $300 for a qualified central air conditioner and heat pump (HVAC and hot water equipments)
* $150 for a qualified furnace or hot water boiler
* $50 for any advanced main air circulating fan.
* $300 for Qualified hot water heaters

The new law will also increase the qualifying standards for hot water boilers, including natural gas, propane, oil furnaces, and oil boilers to 95% AFUE. The qualifying standards for natural gas furnaces and propane furnace remain at 95% AFUE.

The qualifying standard for central air conditioners and heat pumps, which were modified by the Stimulus bill in 2009, are not changed.

The major difference is the new law reinstates the lifetime credit caps of 2005. This means any homeowner who has claimed more than $500 in 25C tax credits since January 1, 2005, is disqualified from any further credits.
Another major question is whether someone can still get the $1,500 tax credit who signs a contract for work before Dec 31,2010 even if the actual work isn’t done until 2011. The work must be completed by December 31, 2010 in order to qualify for the $1,500 cap. If the qualifying improvements are completed before January 1, 2011, then you may still claim the $1,500 cap.

source: Efficiency First

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