The energy tax credit for 2011 is not nearly as generous as the credit was in 2010 when you were able to deduct up to $1500 as as long as it was 30% of the total installed cost of various home efficiency measures like window installations, hot water heaters and more. While the 2011 tax deal Obama just signed didn’t focus much on the tax credit, but rather the lack of a tax rate increase, the inheritance tax and the extension of unemployment benefits, there is a provision in the deal for 2011 that does extend the energy tax credit but the benefit is minimal.
2011 Energy Tax Credit Details:
- The old generous credit titled the 2009-2010 American Recovery and Reinvestment Act (ARRA) – was allowed to expire and was not renewed.
- The new energy efficient tax credit is only a 10% credit, up to a maximum of $500. The prior cap had been up to $1500, which will expire on Dec 31, 2010.
- Of that, only $200 for EnergyStar windows can be applied.
- Furnaces are only allowed to get a $200 credit and they must now be 95% efficient, more stringent than the 90% requirement from 2009-2010.
- Wood heating systems are eligible for a max $300 credit.
- To reiterate, of the various programs you may take advantage of, the cap is $500 total IF you haven’t taken advantage of the credit previously.
- Anyone that took advantage of the prior tax credits cannot utilize the credit in 2011 (no double-dipping).
The 2011 Energy Tax Credit – What Would Darwin Do?
I can’t help but insert my opinion here. The credit, as it is constructed now, is utterly stupid, like most things Congress has been enacting. See, if you’re looking to stimulate the economy, you have to enact either meaningful, stimulative incentives, or not enact anything. To enact a half-measure like this, it’s basically throwing away tax dollars with zero benefit. Let me explain. When the window tax credit was up to $1500 for instance, that was a substantial tax credit, which rightfully incentivized many homeowners to get around to installing new windows, making their homes more efficient, and pump probably $5000-$15,000 into the economy depending on the extent of their upgrade. The dual benefit was lower energy consumption into the future, while providing manufacturers and installers with much needed revenues.
$200 is not going to push someone over the threshold to buy windows. At that level, people were either going to replace the windows or they weren’t, so it’s money just thrown down the drain – very similar to cash for clunkers where people that were going to buy a new car anyway were rewarded for doing so with taxpayer dollars.
Will You Be Using the Energy Tax Credit in 2011?