Do You Qualify for Energy Efficiency Tax Credits?

There’s good news and bad news for investing in renewable energy, electric vehicles or energy-efficiency upgrades for your home.


Solar installations qualify for generous tax credits through 2016, but credits for some other home energy efficiency upgrades and electric vehicle chargers haven't fared as well.

It’s tax time, and there is good news and bad news if you’ve invested in some energy-efficiency upgrades for your home—or still plan to.

As part of the tax bill that was passed by the U.S. Congress in December, some tax credits for energy efficiency upgrades like heating systems, insulation and windows were decreased. But if you installed these upgrades in 2010, you can still claim them on your tax forms at the previous higher levels.

Generous tax credits for renewable energy systems such as solar PV (photovoltaic), solar thermal, geothermal and small wind turbines remained in place, and there are tax credits for purchasing some electric vehicles and electric vehicle charging stations.

Here’s a breakdown of what is and isn’t available:

Solar, Wind, Geothermal

A tax credit of 30 percent—with no upper limit for solar, solar thermal, geothermal and small wind turbines—remains in effect through 2016. Before 2008 the credit had been capped at $2,000, which prevented many from investing in solar PV systems that can cost $20,000 to $30,000. The uncapped credit should continue to help many afford renewable energy systems for their homes.

Solar water heating systems must be certified by the Solar Rating and Certification Corporation (SRCC) or a comparable entity endorsed by the state where the system is installed. At least half the energy used to heat the dwelling’s water must be from solar. Geothermal heat pumps must meet federal Energy Star criteria.

Also check to see what incentives are available in your state, at DSIRE (Database of State incentives for Renewables & Efficiency)

Fuel Cells

A tax credit for a residential fuel cell or microturbine is 30 percent of the cost, up to $500 per .5 kilowatts of power capacity. Fuel cells must have electricity-only generation efficiency greater than 30 percent.

Electric Vehicles and Chargers

A $7,500 federal tax credit exists for the purchase of an electric vehicle like the Chevy Volt, Nissan Leaf or Tesla Roadster. And President Obama’s budget proposal calls for turning that into a point-of-sale rebate so buyers don’t have to wait to file their taxes to enjoy the savings.

Tax credits for EV chargers are another story. According to Plug-in America, the EV infrastructure tax credit was extended for one year, through 2011, but at prestimulus levels. This means that the tax credit on an EV charging station is 30 percent up to $1,000 for consumers and 30 percent up to $30,000 for businesses, rather than 50 percent up to $2,000 and 50 percent up to $50,000 as it has been for the past two years. The new credits apply to equipment installed before the end of 2011.


If you happen to live in an area where EV charging infrastructure is being built by the EV Project and you buy an electric vehicle, you could get a free EV charger.

Energy Efficient Home Improvements

Some bad news here. For 2011, tax credits for efficient residential HVAC systems like furnaces and heat pumps, biomass stoves, insulation, windows, roofs, and water heaters have been slashed from up to $1,500 to $500. In addition, there are now lower, project-specific caps like $200 for energy efficient windows, and $300 for central air conditioning systems, compared to $1,500 in credits that were available for these improvements in 2009 and 2010. Finally, if you claimed over $500 for energy efficient home improvements in previous years, you can’t claim any new credits this year.

However, if you installed these systems in 2010, you can file for the credits at the previous levels. Check the DSIRE web site and Energy Star sites for details for each of the systems. Also, be sure you get the right kind of equipment, such as biomass stoves with efficiency ratings of at least 75 percent, or water heaters with an energy factor of .82 or a thermal efficiency of at least 90 percent. The Energy Star site is an excellent resource for this information.

Other Incentives

A Home Star bill has been before the U.S. Congress to offer homeowners instant rebates of up to $3,000 or more for purchasing a variety of energy efficient products and services, from insulation to more efficient water heaters. The bill has also been proposed by the Obama administration as part of its budget proposal. The proposal is said to enjoy support from both Democrats and Republicans, but funding for the $6 billion, two-year program has been a sticking point.

Home Star should pass—eventually—though it remains unclear whether electricity monitoring and electronic energy management systems like home control and automated lighting systems will be included.


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