Energy Tax Credits – Things You Need to know 

 August 19, 2021

energy tax credits

Tax incentives for energy efficiency and renewable energy are a growing trend in many parts of the world. A recent study showed that in the United States alone, the United States economy will add as much as three hundred billion dollars to the national energy efficiency efforts:

Tax Breaks For Residential Energy Efficiency

Effective June 2021, the United States introduced two major bills intended to increase tax credits for certain forms of energy efficiency and decrease the cost of geothermal and solar power systems for homes and small businesses. The Making Energy Efficient Home Act is sponsored by:

  • Senator James M. Inhofe (R – Oklahoma)
  • Representatives Jim Moran (D – Virginia)
  • Barney Frank (D – Pennsylvania)
  • Lee Todd (R – Iowa)
  • Joe Laning (D – California)
  • Jim McDonough (D – Massachusetts)
  • Robert E. Barr (D – Georgia)
  • James Brochin (D – California)
  • Andiealed (D – Arizona)
  • Tom Coburn (R – Oklahoma)
  • Edward M. Royce (D – California)
  • Brad Sullivan (R – Alaska).
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The Making Energy Efficient Home Act is part of the American Recovery and Reinvestment Act. It is included in the U.S. Department of Energy’s Office of Science and Technology’s Research and Economic Development Act.

Energy Tax Credits

Tax Breaks for Renewable Energy Facilities: The Making Energy Efficient Home Act and its tax incentives are also included in the U.S. Congress’s attempt to stimulate the economy with tax relief. The main tax break provided by the bill is the refundability of the energy tax credits.

According to the law, those who earn a major share of their income from energy efficiency or renewable energy sources receive a substantial tax credit. Those who use energy storage systems receive a refund, according to the law, only if they use such systems in an eligible place.

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The Making Energy Efficient Home Act also includes provisions that encourage owners of qualified residential properties to participate in commercial activities related to renewable energy facilities. As a part of such participation, such property owners will receive a tax credit on their investment in renewable energy facilities. It is interesting to note that while this tax credit is available only to residential property owners, commercial property owners are encouraged to participate in renewable energy facilities.

Which Energy Tax Credits Qualify for Homeowners?

  • WINDOWS, DOORS, AND SKYLIGHTS
  • NON-SOLAR WATER HEATERS
  • HOME INSULATION
  • ASPHALT AND METAL ROOFS
  • HOME INSULATION
  • NON-SOLAR WATER HEATERS
  • BIOMASS STOVES
  • GEOTHERMAL HEAT PUMPS
  • WIND TURBINES
  • AC, HEATING, AND VENTILATION

More Investment

The reasoning for this provision is that many commercial property owners may be investing money in commercial real estate projects that do not generate revenue and will thus lose the tax benefits over time. Thus, the provision encourages such property owners to invest in such projects through tax credits that may exceed the cost of such projects in the future.

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Home Improvement

The second major provision of the Act that qualifies for tax incentives for home improvement involves the establishment of energy tax credits based on the level of improvement to a home’s energy efficiency. If a home qualifies for this credit, then it is ensured that rebates will be provided on its purchase, installation and maintenance.

In order to qualify for this credit, the house or building must have been constructed and upgraded as if it were efficient according to the standards set by the American Society of Home Inspectors (ASHI). The qualifying renovation is defined as one that focuses on maximizing the effectiveness of energy savings and will minimize waste of energy.

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