Tax Credits for Existing Homes in the Energy Policy Act of 2005

In 2005, Congress passed the Energy Policy Act. Incorporated into the Energy Policy Act are tax credits for many types of home improvements, including adding insulation, replacement windows, and certain high efficiency heating and cooling equipment. The maximum amount of homeowner credit for all improvements combined is $500 during the two year period of the tax credit. This tax credit applies to improvements made from January 1, 2006 through December 31, 2007.

Windows & Doors

here will be a tax credit for exterior windows and skylights. This credit will be equal to 10% of the cost of windows, with a cap at $200. Installation costs are not included. To qualify for the credit, a window must meet the building code titled "2000 International Energy Conservation Code" amendments, or simply be designated as an ENERGY STAR window. To verify it qualifies, make sure it has a sticker on the glass with the initials "NFRC," which stands for the National Fenestration Rating Council. For exterior doors, the credit will be equal to 10% of the cost of doors, with a cap of $500 excluding installation costs. To qualify for the credits in Colorado, a door will also need to meet the 2000 IECC and amendments. If you are not in Colorado, go to your library or local building code official to get a copy of the IECC 2000 requirements for your climate zone. The IECC standard applies, even if your local building department has not adopted the IECC.

Roofing

Metal ENERGY STAR roofs will qualify for a tax credit. This credit will be worth 10% of the cost of roofing materials (excluding installation) with a cap of $500. These roofs will have an expected lifetime of more than five years or will need to have a 2 year warranty.

Insulation

Adding insulation to your home will qualify for a tax credit of 10% of the cost of insulation (excluding installation) with a cap of $500. For insulation to qualify it must meet the 2000 IECC. In addition the primary function of the insulation must be to insulate (example: vapor retarders such as Tyvek are covered, siding is not). The siding is also expected to last more than five years or come with a 2 year warranty.

Heating, Ventilating & Air Conditioning (HVAC)

Below is a table outlining the HVAC equipment type, efficiencies, and the tax credit amount.

Water Heater

Gas, oil, and propane water heaters will qualify for a credit of $300 if they have an energy factor rating of .80 or higher. An electric heat pump water heater will qualify for a $300 credit an energy factor rating of 2.0 or higher.

ALL THE IMPROVEMENTS LISTED ABOVE ARE SUBJECT TO A $500 MAXIMUM PER HOMEOWNER FOR ALL IMPROVEMENTS COMBINED.

Alternative Energy Credits

Solar Water Heating: A domestic hot water solar system credit is available for up to 30% of the cost of the system, with a cap of $2,000. The system must use solar power to provide at least half of a home's hot water. The credit is not available for use for swimming pools or hot tubs. The water must be used in the dwelling and the system must be certified by the Solar Rating and Certification Corporation (SRCC).

Photovoltaic Systems: A photovoltaic system is available for a credit up to 30% of the cost with a cap of $2,000. Photovoltaic systems must provide electricity for the residence, and must meet applicable fire and electrical code requirements.

Fuel Cell. Fuel cells will qualify for a tax credit of 30% of the cost of the fuel cell, up to $1000 per kW of power that can be produced. The fuel cell must have an efficiency of at least 30% and must have a capacity of at least 0.5 kW.