ARRA Incentives for Energy Efficiency
The American Recovery and Reinvestment Act (ARRA) provides several tax incentives for individuals to make their residences more energy efficient and for the purchase of energy efficient vehicles. Here are the details.
Residential Energy Property Credit - Up-to $1,500 for energy efficiency improvements in homes
Individuals are able to claim a tax credit for 30% of the cost of qualifying improvements to their homes to make them more energy efficient, up to a maximum of $1,500 for improvements made operational in 2009 and 2010. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
For specific IRS guidance on the requirements for energy efficiency that qualifying purchases have to meet, please check the
IRS guidance document.
Residential Energy Efficient Property Credit - Tax credit of 30% for the purchase of alternative energy equipment
The ARRA provides a 30% tax credit for individuals purchasing solar, thermal, wind, fuel-cell and other types of alternative energy equipment such as solar water heating, geo-thermal heat pumps, wind turbines and other for the heating of water, provisioning of electricity, etc. The act eliminated a cap on such credit, so the 30% is now over the value of the entire cost of the equipment. The equipment needs to be placed in service before January 1, 2017.
Plug-In Electric Drive Vehicle Credit - Anywhere from $2.500, up-to $7,500 ($15,000 in some cases) for the purchase of an electric car
Individuals looking to purchase an electric vehicle in 2010 or beyond (sorry, it is not valid in 2009, though there are not many options available yet anyway) can look forward to generous tax credits to defray the cost of the vehicle. Depending on the battery capacity, the minimum tax credit will be $2,500, and the maximum $7,500. To qualify, the vehicle needs to fulfill the following conditions:
vehicles must be newly purchased,
have four or more wheels,
have a gross vehicle weight rating of less than 14,000 pounds, and
draw propulsion using a battery with at least four kilowatt hours that can be recharged from an external source of electricity .
The credit will diminish once the manufacturer of the vehicle has sold more than 200,000 units.
Tax Credit for Conversion Kits to Modify Vehicles and Make Them Plug-In - 10% or up to $4,000 of the cost of the conversion equipment and labor
Individuals interested in converting a vehicle to a qualified plug-in electric drive motor vehicle and place it in service after Feb. 17, 2009. The maximum amount of the credit is $4,000. The credit does not apply to conversions made after Dec. 31, 2011.
A taxpayer may claim this credit even if the taxpayer claimed a hybrid vehicle credit for the same vehicle in an earlier year.