Green Tax Credits in Plain English

Are you absolutely confused about "green tax credits?" We hear the terminology enough, as green building and green products aren't short on press coverage.  Too often, however, it seems that the tax credit system isn't actually explained, and one is left to wade through Google searches to understand how to qualify for these tax breaks.

Tax Credits for Home Builders

Yes, you read that correctly....there are tax credits available to home builders who build homes to certain energy standards.   These tax credits apply to builders of new manufactured or non-manufactured homes. This is a great way for home builders to make extra money on a home building project, and can be especially beneficial to home builders who build tens or hundreds of homes each year. Each new home that achieves 50% more energy savings from the 2004 International Energy Conservation Code (IECC) qualifies for a $2000 tax credit.   A 30% energy savings qualifies for a $1000 credit.   Builders simply need to fill out and return IRS Form 8908. To qualify for these credits, the home must be completed after August 8, 2005, and sold between Jan. 1 2006 and December 31, 2009.   Builders who have built qualifying homes, but did not apply for the credit, can still apply. We're still waiting to see whether these credits are extended past the end of the year.  More detailed information about the IECC and the tax credits can be found at this link:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_hm_builders

Tax Deductions for Commercial Buildings

Environmental tax credits are not just for residents and residential builders. To understand these available deductions, it's important to read about and understand the ASHRAE Standard 90.1 2001. Commercial buildings qualify for a tax deduction up to $1.80 per square foot when new or existing commercial buildings save 50% of the heating and cooling energy of a building that meets ASHRAE standards. The amount of deduction depends on the building savings.   The deduction can be made to the owner or designer of the building.   They are available for HVAC systems placed in service from Jan 1 2006 through Dec 31, 2013. Check out IRS Notice 2006-52 for guidance on how to make these deductions.   Check out this link for more details:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_comm_buildings

Tax Credits for Homeowners

Far and away, the most available tax credits are available to homeowners. For existing homes in 2009 and 2010, homeowners can get up to 30% of the cost for energy efficient installations of windows and doors, insulation, roofs, HVAC systems, water heaters and biomass stoves. For new and existing homes through the year 2016, tax credits are available to homeowners of up to 30% the cost of energy efficient installations of geothermal heat pumps, solar panels, solar water heaters, small wind energy systems, and fuel cells. Information on each available credit is available at this link, in easy to understand language:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_index

How to Get A Better Grip

Learning more about available tax credits is both easy and hard for the same reason:   there is a of information on the subject out there. Here are some good resources: http://www.energystar.gov/taxcredits (the BIBLE of energy tax credits - including a summary chart of tax credits for homeowners) The Tax Incentive Assistance Project (TIAP) Read about pending Tax Credit Legislation Check Out this Residential Flyer from the TIAP Check Out this Commercial Flyer from the TIAP This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.
Scott Wolfe
About the Author: Scott Wolfe
Scott Wolfe, Jr. obtained his J.D. degree from Loyola University of New Orleans, and his B.A. from Southern Methodist University in Dallas, TX. In 2006, 2007, 2008 and 2009, Scott was recognized as a Leader in Law by CityBusiness Magazine. The son and grandson of general contractors, Scott is a construction litigator in the Pacific Northwest, and the founding member of the bi-coastal law firm, Wolfe Law Group. Scott is also the founder and CEO of Express Lien, Inc., a legal document preparation service for contractors. In 2008, City Business Magazine recognized Scott as one of its Innovators of the Year for the Express Lien concept. As an entrepreneur himself, Scott has a strong background in business and commercial transactions and laws. He focuses his practice on the legal issues facing the construction industry, and has represented clients in multi-million dollar construction disputes in litigation and alternative dispute resolution proceedings. Scott is a LEED AP.

3 comments on “Green Tax Credits in Plain English”

  • Our firm Engineered Tax Services provides the required Engineered third party certification for commercial property owners. We work with Architects, Lighting and HVAC contractors to receive the benefit when involved in the design of Public and Government buildings.

    ETS is staffed with Professional Engineers and work with many of the top 100 CPA firms to bring Engineering and Accounting together. ETS works very closely with the IRS to stay on top of changes and benefits that has to do with the Energy Policy Act of 2005.
    We are licensed in all 50 States to perform these studies and our firm is doing between 110 -120 studies a month.
    Please feel free to me kim@engineeredtaxservices.com

  • TAX CREDIT/BENEFITS
    It’s a great time to invest in geothermal heating and cooling technology. The American Recovery and Reinvestment Act of 2009 recently lifted the caps on tax credits to qualified geothermal heat pumps, which was previously set at $2000. Homeowners who install a geothermal ground loop or ground water geothermal heat pump qualify for this one time of up to 30% of the total investment, as long as the pump meets or exceeds EnergyStar requirements and installed after December 31, 2009. Business owners will receive a credit of 10% of the total investment. Units installed in 2008 are subject to a $2,000 cap, but those installed between 2009-2016 have no cap.

    This substantial tax credit is just one of the many benefits of using geothermal technology to heat and cool your home. Geothermal systems use 25-50% less electricity than conventional systems. According to the EPA, geothermal pumps reduce energy consumption up to 44% compared to air-source heat pumps, and up to 72% compared to standard air-conditioning. In humid areas, like Florida, geothermal heat pumps improve humidity control by maintaining 50% relative indoor humidity.

    But it’s not just the tax credit or energy savings that should peek your interest, geothermal heat pumps are also extremely durable and reliable. The underground piping carries warranties of 25-50 years, and the heat pumps are known to last twenty years of longer.

    So, if you’re looking for a reliable system that will also give you tremendous savings on your energy bill over the long-run, a geothermal heat pump may just be what you’re looking for!

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