Energy Efficiency Pays Off . . . For Now

COLLEGE STATION, Tex. – Homeowners distressed over high energy bills and even higher taxes can receive tax credits for certain energy efficiency property and improvement expenditures. But they had better act quickly.

One tax credit, the nonbusiness energy property credit, expires at the end of this year, and the other, the residential energy-efficient property credit, expires at the end of 2008.

“Because of the time constraints, homeowners will have to plan carefully,” said Dr. Jerrold J. Stern, research fellow with the Real Estate Center at Texas A&M University and an accounting professor at Indiana University.

Stern said there are two categories of nonbusiness energy property credit: credit for certain residential energy property expenditures paid during the year, and credit for 10 percent of the cost of certain energy-efficient improvements installed during the year.

Total accumulated credit limits for 2006 and 2007 are:

• An overall limit of $500 for the total of 2006 and 2007 expenditures,
   
• An accumulated credit limit of $200 for certain windows, and
   
• An accumulated credit limit of:
   
• $50 for any advanced main air circulating fan used in natural gas, propane or oil furnaces;
   
• $150 for any qualified natural gas, propane or oil furnace or hot water boiler; and
   
• $300 for certain energy-efficient building property, such as heat pumps, central air conditioners and water heaters.
   

To qualify for the credit, Stern said the improvements and property must meet specific IRS standards and requirements. Energy property must be new, not used.

If the homeowner does not exceed the $500 overall limit, a tax credit for 10 percent of the cost of qualified energy-efficiency improvements may be available. These items must be new and reasonably expected to remain in use for at least five years.

Items that may qualify include insulation material or an insulation system primarily designed to reduce the heat loss or gain of a home; exterior windows (including skylights); exterior doors; and any metal roof installed on a home, but only if this roof has appropriate pigmented coatings that are specifically designed to reduce the heat gain of the home.

Homeowners may also take advantage of the residential energy-efficient property credit pertaining to solar and fuel cell property. This credit, which expires in 2008, can result in even higher tax savings.

The credit is 30 percent of the homeowner’s costs for qualified photovoltaic property, solar water heating property, and fuel cell property. Credit limits are:

• $2,000 for qualified photovoltaic property costs (for example, solar panels),
   
• $2,000 for qualified solar water heating property costs, and
   
• $500 for each half kilowatt of capacity of qualified fuel cell property for which qualified fuel cell property costs are paid.
   

For more information on how to benefit from being energy efficient, read “Energy Efficiency Pays” in the April 2007 issue of Tierra Grande.

The Real Estate Center (recenter.tamu.edu) has been providing solutions through research for 35 years. Funded primarily by Texas real estate licensee fees, the Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers and the general public.

- 30 -