Tax Credit EESA

· Credit for Energy-Efficiency Improvements to Existing Homes. The Energy Policy Act of 2005 created a tax credit for homeowners who installed higher efficiency HVAC equipment in tax years 2006 and 2007. EESA extends the tax credit for energy-efficient purchases in 2009, and adds energy-efficient biomass fuel stoves – such as wood pellet stoves – as a new class of eligible energy efficient property. Taxpayers that have already claimed the maximum $500 in tax credits in 2006 or 2007 are not eligible to claim further credits in 2009.

Air handler ($50) must utilize less than 2% of a furnace’s total energy consumption

Central Air conditioner ($300) must have a SEER of at least 15 and an EER of at least 13

Electric heat pump ($300) must have at least an HSPF of 9, SEER of 15, and EER of 13

Biomass fuel stove ($300) must have a thermal efficiency rating of 75%

· Residential Geothermal Heat Pump Tax Credit. The Energy Policy Act of 2005 contained a $300 tax credit for homeowners who installed geothermal heat pumps. EESA creates a new $2,000 tax credit for home owners who install a geothermal heat pump – not subject to the $500 cap established for the products referenced above. EESA also qualifies geothermal heat pumps for a $6,667 tax credit when used on a jointly occupied dwelling unit, condominium, or for owners of cooperative housing. In addition, the tax credit can be used to offset any Alternative Minimum Tax liability. The new credit is retroactive for 2008 and continues through 2016.

Geothermal heat pump ($2,000) must meet Energy Star requirements in effect at the time that the expenditure for such equipment is made – credit amount is 30% of the total expenditure, capped at $2,000

· Residential Photovoltaic Property Tax Credit. The Energy Policy Act of 2005 created a tax credit for homeowners who installed photovoltaic property for their residence. The law extends the credit for residential photovoltaic property through 2016 and removes the credit cap (currently $2,000) for solar electric investments.

Photovoltaic property (30% of total expenditure) must use solar energy to generate electricity for a residence, and must meet applicable fire and electrical code requirements.

· Homebuilder Credit for Energy-Efficiency Improvements to New Homes. Under current law, homebuilders receive a credit for the construction of energy-efficient new homes that achieve a 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling. The credit equals $1,000 for homes meeting a 30% efficiency standard, $2,000 for homes meeting a 50% standard. EESA extends the new energy efficient home tax credit through 2009.

· Energy-Efficient Buildings Deduction. Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50% energy savings target. The energy savings must be accomplished through energy and power cost reductions for the building’s heating, cooling, ventilation, hot water, and interior lighting systems. EESA extends the energy efficient commercial buildings deduction for five years – through 2013.

· 15 Year Depreciation for Restaurant, Retail, and Other Qualified Property. The American Jobs Creation Act of 2004 changed the depreciation period for qualified improvements of leasehold and restaurant property from 39 years – to 15 years. The provision applied to improvements that included new HVAC systems or refrigerators, and expired December 31, 2007. EESA reinstates the allowance for the accelerated depreciation retroactively for 2008 and goes through 2009. It also expands it to include leasehold improvements in buildings and restaurants less than three years old, as well as including retail space more than three years old on the eligible property list.