The Energy Efficiency Tax Credit - How to Get It
On Oct. 3, 2008, President George W. Bush signed into law the Emergency Economic Stabilization Act of 2008. As part of this piece of legislation, the United States government is offering tax incentives for consumers and businesses to purchase and install certain energy-efficient home improvement products like skylights, hybrid and electric automobiles, and water heating equipment.
Included in the water heating category are tankless water heaters, which are eligible for energy tax credits. Rheem and Takagi are among the qualifying manufacturers.
Energy tax credits of $300 had been available for home improvements placed in service from Jan. 1, 2009 through Dec. 21, 2009. Then, on Feb. 17, 2009, President Obama made two significant revisions to the Emergency Economic Stabilization Act.
He first extended the available energy tax credits through Dec. 31, 2010, then increased the total available tax credit to an equivalent of 30% of the full purchase price and installation price with a cap of $1500.
According to ENERGY STAR, the IRS defines "placed in service" as when the property is ready and available for use. All ENERGY STAR-qualified whole-home gas tankless and gas condensing models with an energy factor of 0.80 or greater WILL qualify.
The qualifier is based on when the unit is placed in service, so units purchased before Jan. 1, 2009 but not yet installed may qualify if installed between Jan. 1, 2009 and Dec. 31, 2010.
Now the bad news.
Any qualified home improvements made in 2008 or earlier are NOT eligible for the energy tax credit. And ENERGY STAR-qualified, high-efficiency gas storage water heaters (those that store water in a large tank) will also NOT qualify. Also, new construction and rentals do NOT qualify.
So, what's the difference between a tax credit and a tax break? A tax credit is usually more valuable than an equivalent tax deduction, and it directly reduces the taxable amount due dollar-for-dollar. For example, if you receive a $500 tax credit, $500 is subtracted from your overall tax owed, and if you qualify for a refund, your refund will reflect this credit.
On the other hand, a tax break only removes a percentage of the tax you owe by reducing your overall taxable income. So the actual value of the tax break could vary depending on each household's actual taxable income.
Be sure to save any receipt and manufacturer's certification statement for tax purposes. And for complete information on products covered by the energy tax credit, visit the ENERGY Star website.
For homeowners, the clock is ticking on when fixtures and appliances should be replaced. With tax incentives, it's a prudent choice to purchase an energy-efficient upgrade. But ultimately, it's up to you.
Until next time, Happy Home Improving!
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