World leaders and various organizations around the world have made commitments to work toward the goal of providing affordable clean energy for everyone by 2030 and net-zero harmful gas emissions by 2050. To achieve this, it is necessary for every man, woman, and child on Earth to work toward the same goal. Fortunately, families can do so and save money as well.
Tax Credits for Building an Energy-Efficient Home
If you are planning to be a homeowner, you can earn tax credits by having your house built to energy-efficient specifications. The house must be 50 percent more energy efficient than the standards set by the 2006 International Energy Conservation Code (IECC) and its extensions. A fifth or more of the energy conservation must be from modifications in the home’s foundation, walls, and roof, also called the building envelope.
You have to be the one spending for the construction to earn the tax credit of $2,000. The requirement is for the house to be built from January 1, 2018 to December 31, 2021. If the house you had built qualifies, and you have not applied for the tax credit, you can still apply for it before the deadline.
Tax Credits for Residential Renewable Energy
For both newly constructed and existing homes, the homeowner can earn tax credits by installing renewable energy systems. This means double savings because the tax credit reimburses part of the cost of acquisition, and you enjoy lower energy bills for as long as the systems are in place.
The credit is 30 percent of the cost for those installed on or before December 31, 2019; and 26 percent of the cost for those installed from January 1, 2020 to December 31, 2022. It will be lowered to 22 percent of the cost for those installed from January 1, 2023 to December 31, 2023. Among the systems included are geothermal pumps, solar power systems, residential wind turbines, fuel cells, and biomass stoves.
A geothermal pump converts heat from the ground into energy. It must be Energy Star qualified and the cost basis includes installation. The home can be a secondary residence, such as a weekend place.
A solar energy system converts heat from the sun into energy. The cost basis includes the residential solar panel installation and the home can be a secondary residence, as well.
A residential wind turbine converts kinetic wind energy into electricity. To be qualified as a residential type, it must produce electricity of not more than 100 kW. The costs basis also includes installation, and the home can be a secondary residence, too.
A fuel cell is similar to a battery that uses hydrogen and other clean fuels to produce electricity. There is a tax credit cap of $500 for every 0.5kW capacity. The fuel cell must not have less than a 0.5kW capacity and its electricity generation efficiency must be more than 30 percent. The costs basis also includes installation, but the home must be the primary residence of the taxpayer.
A biomass stove uses biomass fuel such as wood, fibers, grass, and crop residues. Its rating for thermal efficiency must not be less than 75 percent.
Tax Credits for Energy-Efficient Residential Equipment
Certain energy-efficient equipment for the home qualify for varying tax credits as long as they are Energy Star certified. An air-source heat pump earns a $300 tax credit. A split system must have a heating seasonal performance factor (HSPF) of not less than 8.5, an energy efficiency ratio (EER) of not less than 12.5, and a seasonal energy efficiency ratio (SEER) of not less than 15. For a package system, the HSPF must not be less than 8, the EER must not be less than 12, and the SEER must not be less than 14.
A central air conditioning system earns a $300 tax credit. For a split system, the SEER must not be less than 16 and the EER must not be less than 13. For a package system, the SEER must not be less than 14 and the EER must not be less than 12.
A gas, propane, or oil-powered boiler earns a $150 tax credit with the cost basis including installation. It must have an annual fuel utilization efficiency (AFUE) of not less than 95.
A gas furnace earns a $150 tax credit. It must also have an annual fuel utilization efficiency (AFUE) of not less than 95. A blower motor earns a $50 tax credit provided it uses two percent or less of the total energy of the furnace.
A gas, propane, or oil-powered water heater earns a $300 tax credit. Its thermal efficiency must not be less than 90 percent, or it must have a uniform energy factor (UEF) of not less than 0.82. An electric water heater earns a $300 tax credit provided it has a UEF of not less than 2.2.
Tax Credits for Energy-Efficient Residential Improvements
Energy Star certified home improvements for energy efficiency in the roof, insulation, doors, windows, and skylights earn tax credits of 10 percent of costs, except installation, up to $500. For windows, the cap is $200. Families can, therefore, improve their comfort in both summer and winter while saving on costs and knowing that they are doing their share for the planet.
