Posted by Jason Pelletier, Low Impact Living

If you’re looking to make a major new green home improvement, here are some items you definitely want to keep in mind:

Solar Hot Water Heaters. The NEW credit removes a $2,000 limit on the credit you could receive for a new system, so larger solar hot water systems will be eligible for the full 30% tax credit. The previous tax credit cap of $2,000 meant that you wouldn’t get any additional help if your solar hot water system cost more than $6,667, which many do. To qualify, the solar hot water system must provide at least 50% of your home’s hot water, and it can’t be used for heating pools.

Solar Photovoltaic Systems. As with a solar hot water system, the NEW tax credit removes the previous $2,000 maximum benefit cap. You now get 30% of the cost as a credit regardless of the total amount. Because solar PV systems are so expensive, this is a MAJOR new benefit.

Geothermal Heat Pumps. We’ve written about geothermal heat pumps before - they’re among the most efficient ways to heat or cool our homes, but they’re very expensive. The new stimulus package gives you a 30% credit with no upper cap for installing one, as long as it is an Energy Star version. As with solar PV systems, this can mean thousands of dollars for you. Previously, the credit was for 30% but was capped at $2,000.

Cool Roofs. Cool roofs can save major money if you live in a climate where air conditioning bills dominate your utility spending. Now, you can get up to a $1,500 tax credit (30% of the installation cost) for a cool roof, whereas the previous amounts were only 10% of the cost with a maximum of $300. To count, it needs to be an Energy Star qualified roofing product.

Residential Wind Energy Systems. Today there are more options for residential wind turbines than ever before. Now, you can get up to 30% of the cost back as a tax credit with no cap on the total amount. This isn’t as much of a benefit as in other categories, for the previous maximum credit amount for small wind systems was $4,000. To get any added benefit, you’ll have to spend at least $13,300, which is a pretty large turbine on your property!

High Efficiency Hot Water Heaters. The new tax credit is for 30% of the installation cost up to $1,500. However, the new unit must have an energy factor of at least 0.82, which rules out even the new Energy Star storage hot water heaters. All new Energy Star tankless hot water heaters will qualify, as will some very high efficiency storage versions (such as the AO Smith Vertex).

As with anything tax-related, you need to consult with your accountant before assuming any of these credits are “in the bank.” Some important caveats to note:

The credits are for improvements made in 2009/10, with the exception of geothermal heat pumps, solar HW/PV, and wind turbines (2009 - 2016).

The cool roof and standard hot water heater credits are NOT standalone - you get up to $1,500 for ALL of your energy efficiency improvements together, which includes windows, insulation and the other more typical upgrades we’ve written about previously. The other credits we’ve discussed above (solar HW/PV, geothermal, wind energy) are standalone credits and do not count towards the $1,500 energy efficiency cap.

Only the solar HW/PV, geothermal heat pump, and wind energy system credits can be claimed by folks building new homes. There’s another set of incentives for typical energy efficiency measures in new home construction that flows through contractors.

For more information on all of these programs, please visit Energy Star’s great tax credit summary.

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