What’s in it?...
On July 29, 2005, Congress passed the first comprehensive energy legislation in over a decade. While the bill will help address long-term challenges, there are many provisions that will help families save energy — and money too!
Among the most significant elements in the bill are tax savings for energy efficiency and conservation improvements:
The Energy Policy Act of 2005
- Consumers can receive a tax credit of up to 30% of the cost, or up to $2,000, for installing solar-powered hot-water systems used exclusively for purposes other than heating swimming pools and hot tubs.
- Consumers can receive tax credits up to $500 on the amount they spend to upgrade thermostats, to caulk leaks, or to stop energy waste.
- Consumers can receive up to $200 credit for installation of new exterior windows.
- Consumers can receive up to $300 credit for purchases of a highly efficient central air conditioner, heat pump or water heater.
- Consumers can receive up to $150 for installation of a highly efficient furnace or boiler.
- A new provision provides a 10% investment tax credit for expenditures on improvements to the building envelope.
- Allows credits for purchases of advanced main air circulating fans, natural gas, propane, or oil furnaces or hot water boilers and other qualified energy efficient equipment.
- Consumers can also receive a tax credit for solar photovoltaics, similar to the solar hot water credits, with a $2,000 limit. These two solar tax credits can be used together for a maximum of $4,000
For Home Builders
- Under the Energy Policy Act of 2005, an eligible contractor who constructs a qualified new energy efficient home may qualify for a credit of up to $2,000. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards. The home qualifies for the credit if:
It is located in the United States;
- Construction is substantially completed after August 8, 2005;
- It meets the statutory energy saving requirements, and
- It is acquired from the eligible contractor after December 31, 2005, and before January 1, 2008, for use as a residence.
In general, to meet the energy saving requirements, a home must be certified to provide a level of heating and cooling energy consumption that is at least 30 to 50 percent in the case of manufactured homes, and 50 percent for other homes below that of a comparable home constructed in accordance with the standards of the 2004 Supplement to the 2003 International Energy Conservation Code. It must also have building envelope component improvements providing a level of heating and cooling energy consumption that is at least 10 percent below that of a comparable home. Manufactured homes can also qualify for the credit by meeting Energy Star standards.
Energy Credit for Home Builders
Under the Energy Policy Act of 2005, an eligible contractor who constructs a qualified new energy efficient home may qualify for a credit of up to $2,000. The credit is available for
all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards.
- Site-built homes qualify for a $2,000 credit if they reduce energy consumption by 50 percent relative to the International Energy Conservation Code standard.
- Manufactured homes qualify for a $1,000 or $2,000 credit depending on the level of energy savings achieved.
The guidance provides information about the certification process that a builder must complete to qualify for the credit. The guidance also provides for a public list of software programs that may be used in calculating energy consumption for purposes of obtaining a certification.
- The energy bill extends an existing tax credit, for as much as $4,000, for buyers of electric cars or those powered by rechargeable batteries.
- Starting in 2006, hybrid-car buyers and advanced lean-burn technology vehicles will be eligible for tax credits ranging from $1,700-$3,000. This credit has two components: hybrids that save the most fuel compared with 2002 models, and the vehicle’s estimated lifetime fuel savings.
- The amount of credit for the purchase of a fuel cell vehicle is determined by a base credit amount that depends up on the weight class of the vehicle and, in the case of automobiles or light trucks, an additional credit that depends upon the rated fuel economy of the vehicle compared to a base fuel economy.
- For fuel-cell-powered vehicles weighing less than 8,500 pounds, for instance, the base credit will be $8,000 — heavier vehicles will get larger credits.
- Credits are offered for cars and light trucks that are more fuel-efficient than 2002 models.
- A provision permits taxpayers to claim a 30% credit for the cost of installing clean-fuel vehicle refueling property to be used in a trade or business of the taxpayer or installed at the principal residence of the taxpayer.
- Under this provision, clean fuels are considered any fuel at least 85% of the volume of which consists of ethanol, natural gas, compressed natural gas, liquefied petroleum gas and hydrogen and any mixture of diesel fuel and biodiesel containing at least 20% biodiesel. This credit is effective for property placed in service from December 31, 2005 to January 1, 2010.
For more detailed information about federal tax incentives for consumers, businesses, builders and manufacturers and others, visit any one of the web sites listed below:
- Tax Incentives Assistance Project which is sponsored by a coalition of public interest nonprofit groups and government agencies, including the U.S. Department of Energy.
- Powerful Savings is a more thorough look at tax credits and vehicle, home improvement and solar credits available under the Energy Policy Act. This site is a partnership of the Alliance to Save Energy and the U.S. Department of Energy.
For more information on conserving energy in your home and in your car, visit EnergySavers.gov, EnergyStar.gov and Energy Saving Tips.