Energy Efficient Tax Credits

Energy Efficient Tax Credit Facts:

• Contractors that build 50% more energy efficient homes based on the 2003 International Energy Conservation Code (including suppliments) receive a $2,000 tax credit for each home built in the year it is sold.
• Building envelope component improvements must account for at least 1/5 of the 50 percent.
• The home’s energy performance must be conducted in accordance with the “Mortgage Industry’s National Home Energy Rating Standards" or by Energy Star Raters.
• Update:  October 2008.  This tax credit has been extended to 2009

History
In 2005, President George Bush signed the United States Energy Policy Act, which gives financial incentives to residential contractors that build energy efficient homes. The sweeping legislation presents an amazing opportunity to the ICF industry, as the financial incentives help promote the use of insulating concrete forms and other energy efficient building materials. This bill has since been extended, most recently on Oct 3, 2008. The energy efficient new home tax credit is extended through 2009.

Provisions
Homebuilders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50 percent energy savings for heating and cooling over the 2003 International Energy Conservation Code (IECC) plus 2004 supplements. At least 1/5 of the energy savings must come from building envelope improvements (such as ICFs).

Benefits of a Tax Credit
A tax credit, as compared to a tax deduction, can provide significant savings to a tax payer. A tax credit reduces the amount of income tax you have to pay unlike a deduction, which reduces the amount of income subject to tax, a tax credit directly reduces the tax owed.

How to Qualify and Apply for the Tax Credit
Click HERE view IRS Notice 2006-27 which provides guidance for the credit for building energy efficient homes. Additionally, the Residential Energy Services Network (RESNET) provides listings of accredited energy raters and has created a step-by-step guideline to explain how to qualify for the energy efficient tax credit. www.resnet.us

The Internal Revenue Service has created IRS Form 8908 to guide contractors through applying for the tax credit. Please click HERE to view the form.