What is the history of the tax credits?

  • Updated

The Energy Policy Act (EPACT) of 2005 first established the energy efficiency tax credits that were effective in 2006 & 2007. The majority of these tax credits were for 10% of the cost, up to $500.

  • The tax credit was raised from 10% to 30%.
  • The maximum credit was raised from $500 to $1,500 total for the two year period (2009-2010). However, some improvements such as geothermal heat pumps, solar water heaters, and solar panels are not subject to the $1,500 maximum.
  • The tax credits that were previously effective for 2009, were extended to 2010 as well.
  • Efficiency levels for the following products were changed for: central air conditioners, air source heat pumps, windows, and gas, propane, or oil water heaters

On December 17, 2010, the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act " was signed extending the tax credits, but at lower levels, basically rolling back to the 2006-2007 levels. Highlights:

  • The tax credit was extended for 2011
  • New Lifetime limit set at $500
  • 10% up to $500 for insulation, roofs, and doors.
  • Windows capped at $200, but qualification now ENERGY STAR
  • Furnace and boilers capped at $150, and all furnaces and boilers must meet 95 AFUE
  • $50 for advanced main air circulating fan
  • $300 for air conditioners, water heaters, and biomass stoves

On February 9, 2018, the "Bipartisan Budget Act of 2018 (BBA)" was signed, reinstating the non-business energy property credit for 2017, and the residential energy efficient property credit for qualified small wind energy property costs, qualified geothermal heat pump property costs, and qualified fuel cell property costs to the end of 2021.

On December 20, 2019, H.R.1865, the "Further Consolidated Appropriations Act, 2020" was signed into law retroactively extending the tax credits for alternative fuel vehicle refueling property, non-business energy property, new energy-efficient homes, and new energy-efficient commercial buildings. The extension is from 12/31/2017 through 12/31/2020.

On December 21, 2020, the ``Continuing Appropriations Act, 2021 and Other Extensions Act'' was signed into law extending the "Non-Business Energy Property" tax credit through the end of 2021. 

IRS Guidance:

IRS Fact Sheet IR-2009-10 (4/22/2009) Guidance on June 1 windows date

IRS Notice 2009-53 (6/1/2009) Interim guidance for Section 25C 

IRS Notice 2009-41 (5/11/2009) Interim guidance for Section 25D

IRS Notice 2006-26 (2/2006) Interim guidance for Section 25C 

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022. This landmark bill extended and modified many of the tax credits that were previously offered under the Energy Policy Act of 2005. The Inflation Reduction Act of 2022 features tax credits for consumers and businesses that save money on energy bills, create jobs, make homes and buildings more energy efficient, utilize clean energy sources and lower greenhouse gas emissions that contribute to climate change and global warming.  

See more Tax Credit Information from ENERGY STAR.

 

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