Tax Library

The Energy Policy Act of 2005 provides for credits and incentives for Builders and Consumers to receive tax relief for instituting energy efficiency measures.

In order to qualify for these incentives each builders homes, commercial buildings, etc. must have a certified HERS Rating performed by a certified energy rater and achieve a 50% energy savings compared to the 2004 IECC code.

Certified Energy Raters, LLC are certified and qualified professionals who work in the energy field full time consulting, testing and certifying new construction for both Energy Star and the Federal Energy Tax Credit.

There is an important distinction between a tax deduction and a tax credit. A tax deduction is subtracted from income before total tax liability is computed. A tax credit is subtracted from the total tax liability. This means that they have very different values, with a credit being 3 or more times more advantageous than a deduction. (for example a tax credit of $ 2,000.00 for someone in the 28% bracket is equivalent to a tax deduction of $ 7,142.00.00). It pays to go energy efficient!

Treasury and IRS Provide Guidance on Energy Credit To Home Builders

IR-2006-32, Feb 21, 2006

Washington — The Internal Revenue Service today provided guidance regarding the energy efficient homes credit available under the Energy Policy Act of 2005. Under the new provision, an eligible contractor who constructs a qualified new energy efficient home may qualify for a credit of up to $2,000. The credit is available for all new homes, including manufactured homes constructed in accordance with the Federal Manufactured Homes Construction and Safety Standards.

The home qualifies for the credit if:

It is located in the United States;
Its construction is substantially completed after August 8, 2005;
It meets the statutory energy saving requirements, and
It is acquired from the eligible contractor after December 31, 2005, and before January 1, 2008, for use as a residence.

In general, to meet the energy saving requirements, a home must be certified to provide a level of heating and cooling energy consumption that is at least 30 to 50 percent in the case of manufactured homes, and 50 percent for other homes below that of a comparable home constructed in accordance with the standards of the 2004 Supplement to the 2003 International Energy Conservation Code. It must also have building envelope component improvements providing a level of heating and cooling energy consumption that is at least 10 percent below that of a comparable home.

Manufactured homes can also qualify for the credit by meeting Energy Star standards.

Site-built homes qualify for a $2,000 credit if they reduce energy consumption by 50 percent relative to the International Energy Conservation Code standard.
Manufactured homes qualify for a $1,000 or $2,000 credit depending on the level of energy savings achieved. The guidance provides information about the certification process that a builder must complete to qualify for the credit. The guidance also provides for a public list of software programs that may be used in calculating energy consumption for purposes of obtaining a certification.