Tax Incentives for Energy Efficiency


The Energy Tax Incentives Act of 2005 is something that most investors, I assume, know little about. The government passed law that encourages energy conservation for builders, manufacturers, and everyday homeowners. In doing some research, I found a good synopsis of how this law can help you out (Source: RISMedia)

Energy Efficient New Home: Contractors are eligible for a tax credit of up to $2,000 for each new (or significantly rehabilitated) home “substantially completed” and sold during 2006 and 2007, provided the home meets certain energy savings criteria. If you’re in the market for a brand new home, make sure the builder passes this lucrative tax break on to you.

Energy Efficient Commercial Improvements: If you own a commercial building or condo, you’re eligible to claim an immediate deduction of up to $1.80 per square foot (versus depreciating the costs incurred over 39 years) by making major energy saving improvements to your building’s lighting, hot water, and HVAC systems during 2006 and 2007. Upgrading insulation, metal roofs, and exterior doors and windows also counts towards this deduction.

Energy Efficient Home Improvements: You can now qualify for a tax credit equal to 10% of the money spent on the installation of certain energy efficient improvements to your principal residence, including insulation and exterior windows, doors, and skylights. You can also take a tax credit for “qualified energy property” including up to $50 spent on circulating fans, $150 on furnaces or hot water boilers, and $300 on heat pumps, water heaters, and central air conditioning. The credit applies for purchases made during 2006 and 2007, and is limited to a lifetime max of $500 per dwelling, with no more than $200 of the credit to be taken for replacement windows.

Energy Efficient Appliances: The law provides manufacturers with a tax credit ranging from $50 to $200 per unit for each energy efficient dishwasher produced in 2006 and 2007, and for each washing machine and refrigerator produced between 2005 and 2010. If purchasing an energy efficient appliance is in your plans, make sure the manufacturer passes this tax savings on to you.

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

1 Comment

  1. Awareness and transparency in public & political action is key to community understanding and involvement in energy efficiency.

    As an energy efficient provider in Colorado for 14 years, our clients have included IBM, Lockheed Martin, Qwest, City of Denver and many property management companies.

    I was surprized when the new Colorado government reduced energy efficient opportunities, while increasing spending.

    Since August 2006 I have been trying to meet with the Governor, the legistlature and the Public Utilities Commission without success.

    We should remember that the founding fathers were suspicious of large government and when the people no longer have access to the government then whether its is energy efficiency or any other matter, we no longer have a government by the people and for the people.

    [email protected]

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