Fiscal Cliff Bill Extends Energy Efficiency Tax Credits

January 15, 2013

Passed at the beginning of the new year to avoid tax increases for most Americans, as well as siginificant, across-the-board spending cuts, the American Taxpayer Relief Act of 2012 is bringing back energy efficient tax credits for windows, doors and skylights.  Specifically, the bill reinstates the 25c tax credits that expired at the end of 2011 and extends them through the end of 2013.

  The 2012 Residential Energy Credits Form 5695 reflects the reinstatement of homeowner tax credits for windows, doors and skylights.

Additionally, the new bill extends business credits of up to $2,000 for builders and contractors of new and renovated energy efficient homes through the end of 2013.  It does change the requirements, however.  The original law required new and renovated homes to be 50 percent more energy efficient than those built under the 2003 edition of the International Energy Conservation Code.  The recent bill now references the 2006 edition of the IECC as the baseline.  

The 25C homeowner tax credits have been reinstated at the 2011 levels of up to 10 percent of the cost of building envelope improvements with a maximum deduction of $500. The credits, in place retroactively for 2012 and in effect through the end of 2013, also include a maximum credit of $200 for windows. Those maximums are well below those in place for 2009 and 2010.  Under the 2009 stimulus bill, homeowners could receive a tax credit of up to $1,500 for those two years.

Although information about the reinstatement of the tax credits is not yet posted on the Energy Star website, the recent changes are reflected in the 2012 Residential Energy Credits Form 5695 from the Internal Revenue Service.  Details on the extended homeowner tax credits and builder tax credits  are also available from Dsire, a database of renewable and efficiency incentive programs sponsored by the Department of Energy.

Awareness of the reinstated tax credits within the industry is still fairly limited, but those aware of the changes generally welcome the news.  "The reinstated energy tax credit should create excitement to the homeowner, stop them from procrastinating on a potential upcoming tax credit and highlights the importance of high energy efficient products," says Terry Rex, VP of sales and marketing at B.F. Rich Windows & Doors.

He doesn't foresee too many complications resulting from the retroactive 2012 credits. "I am sure this will result in many requests for documentation on previous orders that homeowners may not have kept for their tax returns," Rex states, but he is confident that companies such as his with sophisticated computer systems will be able to handle such requests fairly easilty.  "We have already started on a manufacturer’s certification letter, along with the pertinent NFRC Certified Product numbers to validate the window performance," he continues. "These documents will be available on our website for homeowners to download for their tax returns."

“The Window & Door Dealers Alliance welcomes the reinstatement of 2011 tax credits in the American Taxpayer Relief Act," states Newton Little, a WDDA board member and VP of ACE Glass Co. Inc. in Little Rock, Ark. "Such credits help validate the importance of energy efficient upgrades to the home. We do believe, however, that the $500 maximum credit—and the $200 maximum for windows—limit the effectiveness of these incentives. We believe larger credits are necessary to truly encourage more homeowners to make the kind of investments needed to transform our nation’s existing housing stock to make it more efficient and more sustainable."

“There’s bipartisan agreement that increased energy efficiency benefits our country," adds Jim Gandorf, WDDA VP, "and we plan to work with other industry organizations to provide lawmakers with a better understanding of our markets to find the most cost-effective incentives to make both new and existing homes more energy efficient.”

“For the second time in a contentious lame duck session of the 112th Congress, energy efficiency proved to be the ‘bipartisan sweet spot’ on energy legislation," says Kateri Callahan, president of the Alliance to Save Energy, a Washington, D.C.-based advocacy group. She sees the passage of the tax credits as a good sign for the future. “With the advocacy ‘horsepower’ that energy efficiency policy can generate," she states, "we expect the 113th Congress to be bullish in advancing meaningful national energy efficiency legislation."