General Information
Frequently Asked Questions
- General
- Consumers
- Businesses and Non Profits
- New Homes and Buildings
- Passenger and Commercial Vehicles
General
Rebates, Deductions, and Credits - What's the difference?
Tax deductions reduce your overall taxable income with the value of the deduction dependent on your tax bracket. For example, if you are eligible for a $1,000 deduction and are in the 20% tax bracket, the deduction will reduce your taxes by $200. Tax incentives, such as the ones provided for in the 2005 Energy Policy Act, reduce the amount of tax you owe dollar for dollar. Rebates are simplified tax incentives- instead of reducing the amount of tax you owe; rebates reduce the cost of a purchase, such as a new cell phone. Rebates on energy-efficiency investments are offered by some utilities and states.
What paperwork or forms are needed to prove improvements were made, and where can I find them?
IRS forms can be found on the main TIAP home page, www.energytaxincentives.org, and on the appropriate consumer or commercial pages.
I made improvements to my home/purchased an eligible vehicle. Am I eligible for a tax credit?
The eligibility period for when measures are "placed in service" is from January 1, 2006 until December 31, 2007, or in some cases through December 31, 2008. Improvements and purchases "placed in service" prior to this period are not eligible. Incentives for solar PV and hot water systems, commercial buildings, new homes and fuel cells & microturbines have been extended until December 31, 2008. Vehicle incentives are theoretically available through 2010, however it depends upon the manufacturer.
Who can I call for further questions about the tax incentives?
Currently, TIAP is not funded sufficiently to support a phone line. Please direct all questions to tiap@aceee.org, or call the Department of Energy at 1-800-dial-DOE.
How do the federal tax incentives interact with credits or rebates provided by my state or utility?
This question is relevant for federal credits that are based on the cost of a measure. For credits that are fixed (e.g. $300 for an eligible air conditioner), the federal credit is not affected by state credits or utility rebates. For federal credits that depend on the cost of a measure (e.g. upgrades to existing homes and solar energy systems), the federal credit will generally be calculated after deducting the value of utility or state incentives. For example, if upgraded insulation costs $1500 and is eligible for a $300 state credit, the federal credit is calculated on the cost after subtracting the state credit. In this example, the federal credit will be $120, which is 10% of the net cost of $1200 after the state credit is subtracted. For more information please contact your state energy office or local utility.
How will the Alternative Minimum Tax affect me?
At this time, we believe that purchasers subject to AMT may not receive the full benefit of the credit; however the IRS has yet to come out with a final ruling. To determine how AMT will impact you, we recommend that you speak with a tax professional.
Consumers
*Note: At this time the only available incentives for consumers are for the installation of solar PV or water heating systems, fuel cell systems, or for the purchase of qualifying vehicles. Congress has not yet extended the EPAct incentives to cover improvements or purchases made in 2008.
For more information, see www.energytaxincentives.org/general/legislative.php.
What is the limit for consumer tax credits capped at?
Consumers are eligible for up to $500 per home*. Improvements of lesser amounts can be bundled together to equal this cap over the two year period.
*Excludes vehicle and solar PV or water heating credits.
Which climate zone am I in?
Climate zone information from the International Energy Conservation Code 2004 Supplement Edition (8 MB PDF).
Where can I find a list of energy consultants?
Consumers can find certified home energy raters through the Residential Energy Services Network (RESNET) website.
Which water heaters qualify for a tax credit?
If your water heater was installed prior to January 1, 2008, you may be eligible for an incentive if the water heater meets the necessary energy efficiency level. Electric heat pump water heaters with an Energy Factor of 2.0 and gas/oil water heaters with an Energy Factor of 0.80 qualify for a $300 tax credit (within the $500 cap for all measures combined).
What is the status of tax credits for corn, pellet or wood-burning stoves?
Under the Energy Policy Act of 2005, there are no provisions for a credit for these types of heating units. A rebate may be instituted depending on federal appropriations. More information is available from the Pellet Fuels Institute.
How efficient does my new furnace or boiler have to be in order to qualify for a credit?
Furnaces and boilers have to meet an Annual Fuel Use Efficiency (AFUE) of 95% or better, as defined in DOE test procedures. The exception to this rule is that units with an efficient furnace fan, i.e. one that meets the CEE/GAMA specification can earn a $50 credit irregardless of their AFUE.
I own an apartment building. Do the improvements I have made within the building qualify for a credit?
If the building is not your primary residence, you cannot claim the consumer credits. Specific guidelines and the final ruling on this are to be determined by the IRS. Some rental property owners may qualify for tax deductions under the commercial buildings incentives for buildings greater than 3 stories.
Can I receive a tax credit for a programmable thermostat?
Credits are not available for programmable thermostats in the 2005 energy bill.
How do I know what type of window I need to qualify for a tax credit?
Eligible window products are defined by the IRS based on the 2000 IECC model energy code, including supplements. Energy Star windows will qualify. For more information on qualifying products in your climate zone, visit the Efficient Windows Collaborative website.
Businesses and Non Profits
Are there any benefits or incentives available for publicly-owned buildings?
For publicly-owned buildings, the tax deduction can be assigned to the designer of the building. A public agency could assign the credit to the building designer, negotiate a fee reduction and so realize the credit in that way.
What programs exist to reduce green building costs for non-profits which are not eligible for tax credits?
Please visit the State and Utility incentives section of this site, or check with your local utilities and state energy office for more information.
Are tax credits available for industrial manufacturers?
Industrial manufacturers are eligible for credits on solar, fuel cells, and microturbines.
Where can I find out more about commercial building incentives?
The Commercial Building Tax Deduction Coalition (CBTDC) has a web site that includes a comprehensive list of frequently asked questions.
New Homes and Buildings
Does the builder credit only apply to new homes?
Yes, the builder credit only applies to new homes. For existing homes, the credit goes to the individuals who own the property as their principal residence.
I am building a new home that will be completed in 2008. How can I qualify for the tax credit since I am not making an improvement to a current home, and I am not the builder?
Currently, homeowner credits are available for solar and fuel cell systems, which the new home owner can claim unless the builder is using these systems to qualify for the builder credit.
Is there a pass-through option for federal green building incentives, and what is the process to apply for these incentives?
Designers of buildings owned by public entities, i.e. state and local governments, can qualify for the deduction for commercial buildings. The rules have yet to be written, however we assume that the design firm of record, such as the architecture or engineering firm that files the design drawings with the local jurisdiction, would be the eligible party. They might contract with an energy expert to do the energy design work, but that would be a private contract issue.
Passenger and Commercial Vehicles
When will an official statement be made? Who will make that statement? Will it be posted on a particular website?
On January 13, 2006, the IRS released interim guidance on tax credits for light-duty hybrid and diesel vehicles. To date, the IRS has released notices acknowledging that some Honda, Toyota, Lexus, Ford and Mercury vehicles have been certified for tax credits. For information on which models are eligible and the amount of credit available, see ACEEE's "Light-Duty Hybrid and Diesel Vehicle Tax Credits in the Energy Bill." IRS is expected to issue further guidance on these credits. When the information is available, it will be posted on this website.
Your web site states that the credit amounts in your table are estimates. Where can I find the definitive credit amounts?
Once the manufacturer's determination of the credit amount for a given vehicle has been submitted to and approved by the IRS, the manufacturer will be able to post definitive credit amounts that the purchaser can rely upon to claim the credit. To date, credit amounts for certain GMC, Chevrolet, Honda, Toyota, Lexus, Saturn, Ford and Mercury vehicles have been approved by the IRS. These models are identified in ACEEE's "Light-Duty Hybrid and Diesel Vehicle Tax Credits in the Energy Bill." As the IRS acknowledges further manufacturer certification, this information will be updated both on the ACEEE page and on the TIAP Web site.
What forms do I need to apply for this credit?
See the Vehicles section of this website.
Is this a tax credit or a tax deduction? What's the difference?
Hybrid vehicle purchases were previously eligible for a tax deduction of up to $2000. As of January 1, 2006, purchases of qualified hybrids are eligible for a tax credit. A tax deduction reduces your taxable income; a tax credit is subtracted from the tax you owe.
I heard something about 60,000 vehicles. How exactly does that work?
Once a manufacturer has sold 60,000 qualifying hybrid vehicles, the amount of the tax incentive will decrease as follows: In the quarter that the manufacturer sales reach 60,000, the credit will remain 100%. In the first quarter after this, the credit will stay at 100%. In the second quarter after, the credit diminishes to 50% of the full amount. In the fourth quarter after, the credit is cut to 25%. By the sixth quarter after the manufacturer sells 60,000 qualifying vehicles, the credit will no longer be available for vehicles made by that manufacturer.
How will the IRS know when the 60,000th hybrid is sold? How will consumers be able to find that out?
IRS guidance requires a manufacturer of qualified vehicles to report quarterly on sales of those vehicles. IRS will formally acknowledge these reports, allowing manufacturers and their dealers to inform purchasers whether credits are still available, and the percentage of the applicable vehicle's full credit amount, based on the date the vehicle was sold. Quarterly reports received by the IRS can be found on the IRS webpage "Summary of the Credit for Qualified Hybrid Vehicles."
Can a business receive the credit? How about a tax-exempt entity?
Businesses are allowed to receive credits, but the amount of the credit may be limited by business-related tax laws. A tax-exempt entity may benefit indirectly from the credits through a provision that allows the seller of the vehicle to claim the credit in this case. The seller is required to disclose the amount of the credit to the tax-exempt purchaser, who may be able to achieve a reduction in the purchase price as a result.
Will the tax credits apply to used vehicle purchases?
The credits are not available for used vehicle purchases.
I will be replacing a hybrid with a new hybrid; am I still eligible for the credits? (i.e., Are the tax credits dependent upon what type of car you are replacing?)
The availability and amount of the credit are unrelated to the type of car that the purchaser is replacing.
Does the tax credit apply to a lease? If so, is the credit for the lessee or the lessor?
The IRS states in its January 2006 guidance that it expects to issue guidance later on "rules under which lessors may claim the credits." It is our understanding that the lessee (i.e., the person who will drive the vehicle) will not be eligible for credits.
If you get your name on a waiting list, will it count as being before the 60,000 limit?
The energy bill language requires that the vehicle be "placed into service" in order to receive the credit. However, at this time IRS has not made any specific ruling regarding waiting lists.
