Northwood News ♦ April 2009

A Guide to Federal Energy Efficiency Incentives in 2009

By Steve Rosenstock

Now that the Stimulus Bill has been signed into law, here is a summary of the new provisions that may be of interest to you.

First Time Home Buyers

If you (or you + a significant other) are a first-time home buyer (or have not owned a home for at least 3 years), you can receive a $8,000 federal tax credit for buying a home (hopefully an energy-efficient one) before 1 December 2009.  Unlike last year’s $7,500 tax credit, you do not have to pay it back over 15 years.

However, there is a catch for previous D.C. homeowners:  If you claimed the D.C. homebuyer tax credit in any prior taxable year, you are not allowed to get the new federal tax credit.

(There are also limits to the tax credit for higher income people).

Existing Homes/Efficiency Upgrades

Under the old law, there was a specific lifetime cap of $500, and specific limits on certain types of efficiency upgrades (e.g., $200 for windows).  Now, the lifetime cap is gone and replaced by a new 30 percent tax credit for qualifying updates, up to a total of $1,500 for improvements made from 1 January 2009 to 31 December 2010.  However, there are new requirements for the efficiency upgrades, as shown below.

Insulation must meet values shown in the 2009 International Energy Conservation Code (IECC), instead of the 2003 IECC under the previous law.

In our area (except for Garrett County in Western Maryland and parts of West Virginia) homes are part of Climate Zone 4 (as determined by DOE).  To receive the federal tax credit for an insulation project, you must meet or beat the following insulation levels for the project you are installing:

• Ceiling/Attic:  R-38.
• Wood Frame Wall:  R-13.
• Floor:  R-19.
• Basement Wall:  R-10 continuous insulated sheathing on the interior or exterior of the home, or R-13 cavity insulation at the interior of the basement wall.
• Crawl Space Wall:  R-10 continuous insulated sheathing on the interior or exterior of the home, or R-13 cavity insulation at the interior of the basement wall.
• Windows/Doors/Skylights:  Must have U-factors equal to or less than 0.30 and SHGC (seasonal heat gain coefficient) less than or equal to 0.30 (instead of meeting Energy Star specifications under the previous law).
• Heat Pumps/Split Systems:  The efficiency must be greater than or equal to 15.0 SEER, 12.5 EER, and 8.5 HSPF.
• Heat Pumps/Package Systems:  The efficiency must be greater than or equal to 14.0 SEER, 12.0 EER, and 8.0 HSPF.
• Central Air Conditioners/Split Systems:  The efficiency must be greater than or equal to 16.0 SEER and 13.0 EER.
• Central Air Conditioners/Package Systems:  The efficiency must be greater than or equal to 14.0 SEER and 12.0 EER.
• Gas, Propane, or Oil Water Heaters:  The Energy Factor (EF) must be greater than or equal to 0.82 or thermal efficiency greater than or equal to 90%.
• Electric Heat Pump Water Heaters:  The Energy Factor must be greater than or equal to 2.0.
• Gas, Propane, or Oil Boilers:  The annual fuel utilization efficiency (AFUE) must be equal to or greater than 90.
• Oil Furnaces:  The AFUE must be equal to or greater than 90.
• Gas Furnaces:  The AFUE must be greater than or equal to 95.

Solar Systems and Geothermal Heat Pumps for Your Home

• Solar PV:  30% tax credit, no limit (the $2,000 cap was removed last October with the first financial recovery bill).
• Solar Thermal:  30% tax credit (the $2,000 cap is now removed).
• Geothermal Heat Pumps:  30% tax credit, and the $2,000 cap put in place last October is now removed.  Qualifying systems are those that meet or exceed the Energy Star levels (which have not changed since before EPACT 2005).

New Car Buyers

If you are in the market for an energy-efficient car or SUV under 8,500 pounds, and you buy one before 1 January 2010, you can deduct all “qualified motor vehicle taxes” from your federal tax return.  “Qualified” taxes include state sales taxes, local sales taxes, and excise taxes.  This is an “above the line” deduction, so people who don’t itemize deductions will get the deduction.

There are limits based on the price of the car (up to $49,500 purchase price) and the deduction is phased out for higher income people.

Plug-In Hybrid Electric Vehicles or All-Electric Vehicles

• PHEVs:  the tax credit is the same as before, ranging from a minimum of $2,500 to a maximum of $7,500 based on the size of the battery.  However, the full credit is now available for the first 200,000 vehicles sold per manufacturer (rather than 250,000 total in the U.S.).  Then the tax credits phase out in the same way they phased out with regular hybrid vehicles (50%, then 25%, then 0).

• Electric Low-Speed Vehicles/Motorcycles/3-Wheeled Vehicles:  There is now a 10% tax credit, up to a maximum of $2,500.
• Plug-In Conversions:  If you would like to convert your car to a PHEV, you can get a 10% tax credit, up to $4,000 for the conversion (as long as the battery has a capacity of at least 4 kWh).  This particular tax credit expires on 31 December 2011.

Also, there may be state and local incentives for performing these actions.  Your local utility company may be offering rebates, and some state and local government may offer incentives for making your home more energy-efficient.  A good resource is www.dsireusa.org.

In conclusion, 2009 and 2010 will be very good years to become more energy efficient.

[Rosenstock is Manager of Energy Solutions at Edison Electric Institute in Washington, D.C.]   ■