Capital Commerce: Tax break for energy savings may come soon
With hurricane-induced energy shortages expected to produce astronomical heating bills this winter, some consumer advocates are pushing Washington for relief. One idea being mulled over by White House economic advisers: moving up the effective date of tax breaks for energy-efficiency home improvements. Congress included a number of such incentives in its big energy bill this summer, but they're not scheduled to kick in until January 1.
Under the program, consumers will be eligible for tax credits for adding insulation or a host of other upgrades that would prevent energy waste. The details are complex, with plenty of limitations. Still, the incentives are considered well worth taking advantage of because credits, which reduce the tax that is owed, dollar for dollar, are more valuable than deductions, which just reduce the amount of income subject to tax.
Kateri Callahan, president of the Alliance to Save Energy, a coalition of businesses and public-interest groups, says many are urging Congress to make the tax credits available beginning this fall. That would not only help offset early winter heating costs but might also motivate rebuilders on the Gulf Coast to use more energy-saving materials.
"We want them to be able to move forward with home construction and have it be as efficient as it can be because it's going to be around for another 100 years," Callahan says.
Whenever the program kicks in, here are some key provisions:
- A tax credit of up to 10 percent of the cost of insulation, energy-efficient exterior windows, and some types of heat-reducing roofing material–but only up to a cap of $500. Also, there are separate caps for certain items beneath the $500 ceiling: Only $200 of the credits can apply to windows, $50 to central fan systems, $150 to high-efficiency natural gas or oil water heaters, and $300 to electric heat-pump water heaters, geothermal heat pumps, or high-efficiency air conditioning.
- A seemingly big solar energy credit, allowing taxpayers to recoup up to 30 percent of the cost of purchasing, assembling, and installing solar water heaters and photovoltaic equipment. This, however, is capped at $2,000. With the cost of a solar home heating system ranging from $16,000 to $40,000, according to the Environmental Protection Agency, the credit amounts to a break of about 5 to 12.5 percent. (For the well heeled who are eyeing this bonus as a way to help subsidize the cost of heating a home swimming pool, forget it. The solar credit is disallowed if that's the main purpose.)
- For entirely new homes constructed up to certain energy efficiency standards, taxpayers can claim a credit of $2,000. For new energy-efficient mobile homes, the credit is $1,000.
Like all appealing discounts, the credits are meant to be available for a limited time. On existing homes, the program is due to expire by 2008. For new homes, it's in place for next year only. Unless, that is, Congress decides to extends its largess.
Capital Commerce tells usnews.com readers how decisions made in Washington affect business.
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