Energy Improvement Deduction

There are a number of tax breaks beginning January 1, 2006 to taxpayers for “Qualified Energy Efficiency Improvements” and f “or Qualified Energy Property.” In other words, if you improve the energy efficiency or purchase items that help to improve energy for your home between January 1, 2006 and December 31, 2007, you may qualify for a number of tax deductions.

Under the heading of “Qualified Energy Efficiency Improvements” are insulation, windows, doors, and roofing. Specifically, the following will qualify for a tax break:

Any insulation material or system specifically designed to reduce heat loss or gain

Exterior windows (including skylights)

Exterior doors

Any metal roof having pigmented coatings specifically designed to reduce heat gain which meets Energy Star program requirements.

A number of different items can be purchased under the “Qualified Energy Property.” These include heat pumps, air conditioners, water heaters, boilers, and / furnaces. The specifics that qualify under this heading are:

Electric heat pump water heater with EF of 2.0 or greater

Electric air source heat pumps with HSPF of 9.0 or greater

Geothermal heat pumps: Closed loop products with EER of 16.2 and COP of 3.3 or greater, open loop products with EER of 14.1 and COP of 3.3 or greater and direct expansion (DX) products with EER of 15 and COP of 3.5 or greater

Central air conditioner that receives the highest efficiency tier established by the Consortium of Energy Efficiency as of January 1, 2006

Natural gas, propane or oil water heater with EF or 0.80 or greater

Natural gas, propane or oil furnace or hot water boiler with AFUE of 95% or greater

Advanced main air circulating fan used in natural gas, propane or oil furnace that uses no more than 2% of the total annual energy use of the furnace.

For all these credits, there are limitations on the qualified energy property are as follows:

$50 for any advanced main air circulating fan

$150 for any qualified natural gas, propane, or oil furnace or hot water boiler

$300 for any item of qualified energy property.