Tax Cut Renewal Includes Some Energy Incentives

Dec. 20, 2010
Half a loaf

The Alliance to Save Energy, Washington, D.C., commended the U.S. Senate and House of Representatives for including energy efficiency tax incentives for consumers and businesses in H.R. 4853, the Middle Class Tax Relief Act of 2010.

The energy efficiency incentives will be in effect during calendar year 2011. They consist of a federal income tax credit of up to $500 for homeowners who make certain energy-efficiency home improvements. This is a return to the “pre-stimulus” incentive structure in effect in 2006 and 2007, which limits the tax credit for “building envelope” materials – including insulation, sealing products, certain types of roofs and energy-efficient windows – to 10 percent of their cost. Windows are subject, also, to a flat $200 limit.

The bill also incorporates these dollar limits for other types of energy efficiency upgrades, which are not subject to the 10 percent criterion:

  • $50 for an advanced main air circulating fan (for an HVAC system);
  • $150 for certain natural gas, oil and propane furnaces and hot water boilers; and
  • $300 for “energy efficient building property,” a category that includes electric heat pumps; natural gas, propane or oil water heaters; central air conditioners; electric heat pump water heaters; and biomass stoves for heating or water heating.

H.R. 4853:

  • Extends the new homes tax credit for homebuilders (in order to qualify, new homes must use 50 percent less energy than a typical home for heating and cooling); and
  • Extends and modifies the tax credit for manufacturers of certain energy-efficient appliances.

“The tax incentives adopted today are a welcome signal to U.S. consumers, who currently face rising energy costs in a still-uncertain economy, that Uncle Sam will help them pay for energy efficiency improvements to make their homes more comfortable and their energy bills more affordable for years to come," says Alliance President Kateri Callahan. These incentives will also engage consumers in the all-important effort to curb global climate change and continue encouraging homebuilders and appliance manufacturers to provide energy-efficient products for their customers.

“But,” Callahan continued, “we’re sorely disappointed that Congress did not see fit to make the incentives more generous. That would have increased their use by consumers, to the benefit of our economy, energy security and environment.”