Taxpayers may be able to claim a deduction of $1.80 per square foot for commercial buildings when they achieve a 50% reduction in annual energy cost to the user of the building, as compared to a certain base standard according to the American Society of Heating, Refrigerating and Air-Conditioning Engineers, and the Illuminating Engineering Society of North America.
The tax incentive contemplates the energy costs of heating and cooling, lighting, and water heating. And the types of commercial buildings eligible for the tax deduction include offices, retail buildings, warehouses, rental buildings of four stories or more, and publicly-owned buildings. Compliance is determined by third party inspectors, and energy savings are determined based on software certified by the Department of Energy.
New Homes
Homebuilders can claim a tax credit of $2,000 for new homes that reduce energy use for heating and cooling by 50% as compared to the national model code from the 2004 International Energy Conservation Code (IECC) Supplement. The fabrication of manufactured homes may qualify for a credit of $1,000 for achieving a 30% reduction in energy use. Here again, third-party inspectors determine compliance, and software certified by the Department of Energy is used to determine the energy savings achieved.
Energy-Saving Home Improvements
There are two types of tax benefits available for energy-saving measures for existing homes: one is a credit for 10% of the amount spent on qualified energy efficiency improvements, and the other is a credit of up to $300 for qualified energy property. The total of the two types of credits is subject to a $500 maximum.
Qualified energy efficiency improvements include:
Insulation or a system designed to reduce heat loss or gain,
Exterior windows, including skylights,
Exterior doors,
A metal roof with pigmented coating designed to reduce heat gain.
Qualified energy property includes:
Electric heat pump water heater,
Electric air source heat pumps,
Geothermal heat pumps,
Energy-efficient central air conditioner,
Water heaters,
Furnace or boiler, and
Advanced main air circulating fan.
Each of these types of properties have specific energy efficiency criteria that must be met.
The tax credit limits that apply for qualified energy property are:
$50 for a main air circulating fan,
$150 for a furnace or boiler, and
$300 for any item of qualified energy property.
If you have more than one item of qualified energy property, or qualified energy efficiency improvements, you can combine the individual credit limits as noted above, up to the $500 maximum credit.
Residential Fuel Cells
Individuals can claim a tax credit for 30% of the cost of qualified residential fuel cell property, up to a maximum credit of $500 for each 500 watts of installed capacity.
Business Fuels Cells and Microturbines
In order to qualify for this credit, the fuel cells must have at least a 500 watt capacity, with a generation efficiency of 30% or more. The tax credit for fuel cells is 30% of the cost, up to a maximum of $500 per 500 watts of capacity.
Microturbines must have a 2,000 kilowatt capacity or less, with an efficiency of 26% at International Standards Organization (ISO) conditions. The tax credit for microturbines is 10% of the cost up to a maximum credit of $200 per kilowatt.