Alternative Energy Answers

Enlarge Image Image Gallery This house in Golden, Colo., uses flat-plate solar panels to heat water, which is then stored for domestic use in a tank similar to a conventional gas or electric water heater. WARREN GRETZ/NREL

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Tax credits for energy-efficient home improvements; blower door tests to fix drafty houses; and preventing window condensation.

By Ken Sheinkopf

NEW ENERGY INCENTIVES

Back in the early 1980s, we bought a solar water heater for our home and took advantage of a great federal tax credit (I think it was around 40 percent). I heard on the news that the new energy bill signed by President Bush has tax credits for solar energy systems. Are these the same credits we had before?

—Joseph W.
Scranton, Pennsylvania

Actually, they are much more comprehensive. The Energy Policy Act of 2005 is the first major federal government program for energy in the past 13 years, and it gives tax credits far beyond the solar-only ones that started during the Carter administration and ended in 1985.

The new bill provides tax credits for highly efficient new homes, improvements to existing buildings, high-efficiency air conditioners and home fuel-cell systems, as well as solar water-heating systems and photovoltaics (solar electric systems) installed after Jan. 1, 2006.

Credit amounts range from 10 percent to 30 percent—or offer a fixed dollar amount depending on the measures you take—and you can take advantage of multiple tax incentives when you buy a home or improve your current one. Keep in mind that these are credits, not deductions. The amount of the credit is subtracted directly from the taxes you owe, unlike deductions, which are subtracted from your income to determine your tax liability.

If you buy a new home that uses at least 50 percent less energy compared to the requirements in the model energy code—which contains energy-efficiency criteria for new residential buildings—you will receive a $2,000 tax credit. Even if you aren’t buying a new home, many incentives are available that can make your next home more efficient. Fix up your current home with insulation, new windows or doors, and you can receive a credit of 10 percent (up to $500). Buy a high-efficiency air conditioner, water heater or fan and you can get a credit up to $300. Solar water-heating systems and solar electric systems are eligible for credits of 30 percent (up to $2,000 each). Other products and building strategies are eligible to receive credits, including incentives specifically for manufactured homes. You can check out this easy-to-follow summary of the incentives at aceee.org/press/Tax_incentive05.pdf, or get a summary of the various programs at fsec.ucf.edu/EPAct-05.htm. For more detail, you can find the entire 1,724-page bill at energy.senate.gov/public/_files/ConferenceReport0.pdf.

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