While it wasn’t perfect, the eleventh-hour fiscal cliff deal passed by Congress did manage to preserve a few worthwhile things. Both the wind and biofuel industries breathed a sigh of relief as their tax incentives were extended for at least a year. But commercial clean energy wasn’t the only beneficiary of the last-minute legislation.
The deal also reinstated business and personal tax credits applicable to energy efficient residences and appliances that had expired on December 31, 2011. In a stunning turn of events, changes within the two pieces of legislation actually make it easier for homeowners and builders to take advantage of its benefits.
The two bills receiving an extension through the Act are 26 U.S.C. 45L Business Tax Credit for New and Renovated Energy Efficient Residences and 26 U.S.C. 25C Individual Tax Credit for Energy Efficient Residential Improvements and Appliances, respectively.
Under the extended business tax credit, contractors or developers that construct or significantly renovate “dwelling units” (apartments, condos or single-family homes) to meet certain energy efficiency standards will be eligible for a $2,000 credit. An important clarification means the credit applies to each qualified dwelling, meaning it can be claimed for each apartment and townhome in a larger development. The credit was also extended retroactively, meaning all 2012 and 2013 developments are eligible.
The Act also reinstated the individual tax credit of 10% (up to $500) of the cost of eligible energy efficient upgrades to existing properties, like insulation, windows and door, and energy efficient heating, cooling and water heating appliances. As with the business credit, the Act extended the availability of the individual credit to improvements that occurred between December 31, 2011 and December 31, 2013.