Energy Tax Credits for Homeowners

Treasury and IRS Provide Guidance for Energy Credits for Homeowners:

The Treasury Department and the IRS today have issued guidance (Notice 2006-26) on the certification that homeowners may rely on when they claim credits for purchases that make their homes more efficient.

During , individuals can make energy-conscious purchases that will provide tax benefits when filling out their tax returns . The credit will also be available for purchases in . Manufacturers offering energy efficient items such as insulation or storm windows can assure their customers that their energy efficient items will qualify for the tax credit if certain energy efficiency requirements are met.

A recent tax law change provides a tax credit to improve the energy efficiency of existing homes. The law provides a 10 percent credit for buying qualified energy efficiency improvements. To qualify, a component must meet or exceed the criteria established by the International Energy Conservation Code (including supplements) and must be installed in the taxpayer’s main home in the United States.

The following items are eligible:

  • Insulation systems that reduce heat loss/gain
  • Exterior windows (including skylights)
  • Exterior doors
  • Metal roofs (meeting applicable Energy Star requirements).

In addition, the law provides a credit for costs relating to residential energy property expenses. To qualify as residential energy property, the property must meet certification requirements prescribed by the Secretary of the Treasury and must be installed in the taxpayer’s main home in the United States.

The following items are eligible:

  • $50 for each advanced main air circulating fan
  • $150 for each qualified natural gas, propane, or oil furnace or hot water heater
  • $300 for each item of qualified energy efficient property.

The maximum credit for all taxable years is $500 — no more than $200 of the credit can be attributable to expenses for windows.

Additionally, the new law makes a credit available to those who add qualified solar panels, solar water heating equipment, or a fuel cell power plant to their homes in the United States. In general, a qualified fuel cell power plant converts a fuel into electricity using electrochemical means, has an electricity-only generation efficiency of more than 30 percent and generates at least 0.5 kilowatts of electricity.

Taxpayers are allowed one credit equal to 30 percent of the qualified investment in a solar panel up to a maximum credit of $2,000, and another equivalent credit for investing in a solar water heating system. No part of either system can be used to heat a pool or hot tub.

Additionally, taxpayers are also allowed a 30 percent tax credit for the purchase of qualified fuel cell power plants. The credit may not exceed $500 for each .5 kilowatt of capacity.

These items must be placed in service .

So there it is. I was disappointed to learn that these credits seem to be only for people who own the residence they live in (“the dwelling unit is owned and used by the taxpayer as the taxpayer’s principal residence”) — in other words, if you rent you’re out of luck.

Following up on ’s post about Robert McGee’s surveys of attitudes about tax evasion, the IRS Oversight Board today released the results of its survey of attitudes about tax evasion in the United States.

American taxpayer support for overall compliance reached an all-time high, according to an annual survey commissioned by the IRS Oversight Board. Nearly nine out of ten Americans (88%) feel that it is “not at all” acceptable to cheat on your income taxes, the highest level recorded since tracking began in and up two points from . Attitudinal support for compliance also remains strong, with nearly three out of four agreeing that it is everyone’s civic duty to pay their fair share of taxes (72%).…

Support for turning in tax cheaters also surpassed last year’s record high, with nearly one of every three taxpayers (30%) agreeing that it is everyone’s personal responsibility to report anyone who cheats on their taxes, a six point increase from and 11 points from .

There is no margin of error given for any of these numbers, and they’ve only been doing the survey since , so these “all-time,” “record” numbers may not really be important as such, but this is a bit of a window into attitudes in the U.S. toward tax compliance.

Myself, I was surprised that the percentage of Americans surveyed who “completely agree” that “It is every American’s civic duty to pay their fair share of taxes” was only 72%. I would have guessed that such a loaded question would have gotten nearly unanimous support, especially since as McGee has demonstrated, people tend to be unwilling to support even a statement like “Tax evasion would be ethical if I were a Jew living in Nazi Germany in .”