Ring in the New Year with Energy Efficiency Tax Credits
Commuters, homeowners, and appliance manufacturers – now is the time to make new energy efficiency investments and claim tax credits for improvements you made in 2012. On January 2, 2013, the American Tax Payer Relief Act of 2012 was signed into law, extending many expired tax credits until the end of 2013 and restoring them retroactively for 2012.
Reinstated energy efficiency tax credits can be used towards:
- home improvements and equipment upgrades,
- the construction of efficient residences,
- refueling equipment for alternative fuel vehicles,
- employer-provided transit fringe benefits, and
- the manufacturing of energy-efficient appliances.
Claim up to $500 in tax credits for efficiency improvements in your primary home under the extension of section 25C of the tax code, the Nonbusiness Energy Property Credit. Consider upgrading home equipment, such as water heaters and air conditioners, for more efficient models, or improving home efficiency by installing new windows and doors. Keep in mind that this $500 credit is a cumulative cap for fiscal years 2006 to 2013.
New Home Builders’ Tax Credit
Builders of energy-efficient homes also benefit from the extended tax credits. Up to $2,000 is available for contractors that build homes that consume 50% less heating and cooling energy compared to homes built under the specifications of the 2006 International Energy Conservation Code (IECC). This credit, section 45L of the tax code, applies to qualified homes constructed and acquired before December 31, 2013.
Alternative Fuel Vehicles
Refueling equipment for alternative fuel vehicles can also qualify for the reinstated tax credit - Alternative Fuel Vehicle Refueling Property (section 30C of the tax code). This credit covers up to 30% of the costs for refueling equipment for vehicles that run on hydrogen, natural gas, electricity, and other alternative fuels. Credits for light and heavy duty hybrid vehicles have also been extended to December 31, 2013. These apply to vehicles that meet the specified requirements and are placed in service between 2011 and 2013. Sections 30C and 30D in the tax code outline the details of these credits.
Mass Transit Benefits
The American Tax Payer Relief Act also extends mass transit fringe benefits (section 132(f) of the tax code). The maximum monthly transportation benefits are increased to $245 (up from $125 a month) this year and run through January 1, 2014. These incentives apply to qualified employer-provided benefits such as transit passes, parking, and vanpool benefits.
Finally, the Manufacturers Energy Efficient Appliance Credit encourages innovation by providing federal tax relief for industrial and appliance manufacturers that produce qualified energy-efficient products. Qualified models manufactured in 2011, 2012, or 2013 can receive incentives up to $75 per dishwasher, up to $225 for clothes washers, and up to $200 for refrigerators. Check out the Department of Energy’s Database of State Incentives for Renewables & Efficiency for more information.
Energy Efficiency Clear Priority
While budget uncertainty remains, energy efficiency emerges as a clear priority in the fiscal cliff negotiations. Tax season is right around the corner, so be sure to take advantage of the reinstated energy efficiency tax credits that make efficiency improvements more affordable.Tax credits for electric vehicles and geothermal heat pumps are also still available to help you save money on your energy bills.
For more information, visit
- Energy Efficiency Home and Vehicle Tax Credits
- Commercial and Manufacturing Tax Incentives for Energy Efficiency
- Database of State Incentives for Renewables & Efficiency
Many of the aforementioned tax credits require specific tax filing forms, which are not yet available. The International Revenue Service has stated that it plans to open tax season on January 30th, with several necessary forms for these energy efficiency tax credits to come.
Alliance Policy Intern Christina Ospina contributed to this article.