Recent legislation allows both owners and builders to claim certain tax benefits for the use of energy-efficient building technologies. Both the Energy Policy Act of 2005 and the American Recovery and Reinvestment Act of 2009 ("the Stimulus Bill") included tax benefits for eco-friendly buildings. In addition to reducing future energy costs and promoting environmentally responsible growth, "Green" building can qualify taxpayers for the following tax benefits:

     Tax Benefits for Homeowners:

Under the Stimulus Bill, homeowners can receive a yearly tax credit of up to $1,500 for installing certain eco-friendly updates to a pre-existing home, for an allowable tax credit of up to 30 percent of the total cost of update installation. This is a significant increase from similar $500 tax credits offered in the past. Further, these are "tax credits" rather than "tax deductions," meaning that a taxpayer's total income tax liability can be reduced by up to $1,500. "Green" updates which can qualify for these tax credits include the following:

1. Insulation;
2. Exterior Windows, Skylights, and Doors (including storm windows and doors);
3. Certain HVAC systems;
4. Roofing;
5. Water Heaters (nonsolar);
6. Biomass Stoves (stoves with burn biomass fuel for heat)

To qualify for these tax credits, updates must be made during 2009 or 2010 and must meet certain energy-efficiency standards specific to the type of update. The Stimulus Bill also provides for additional tax credits which are available for both pre-existing homes and new construction through 2016. A taxpayer can receive a credit of 30 percent of the total cost of any qualifying update, with no maximum tax credit amount. Residential Energy Systems which qualify for these unlimited credits are:

1. Geothermal Heat Pumps;
2. Solar Panels;
3. Solar Water Heaters;
4. Small Wind Energy Systems;

Additionally, Residential Fuel Cells and micro turbine systems qualify for federal tax credits of 30 percent of the total cost, with a maximum tax credit of $500 for each 0.5 kW of power capacity.

     Tax Benefits for Builders:

Under the Energy Policy Act of 2005, Builders can qualify for per-home tax credits of up to $2,000 for each new home produced within the United States which meets certain energy-efficiency standards. Builders can only take these tax credits for the year in which the home becomes a residence (i.e. the house must be sold or leased by the end of the calendar year), and the current credits are only available for homes which become residences on or before December 31, 2009. To qualify for the $2,000 per-home tax credit, the home must be new construction and must achieve 50 percent energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements thereto, and at least one-fifth of the energy saved must be due to building envelope improvements. This tax credit can also be taken on a new manufactured home, so long as the home also conforms to Federal Manufactured Home Construction and Safety Standards. Also, a $1,000 per-home tax credit is available for new manufactured homes. To qualify, a new manufactured home must achieve a 30 percent energy savings for heating and cooling over the 2004 IECC and supplements, and at least one-third of the savings must be due to building envelope improvements. Alternatively, a manufactured home can qualify for the $1,000 tax credit if it meets the requirements established by the Environmental Protection Agency under the Energy Star program.

     Tax Benefits for Commercial Buildings:

The Energy Policy Act of 2005 also provides for tax deductions for certain energy-efficient updates installed in commercial buildings located within the United States. These deductions are currently available for updates placed in service on or before December 31, 2013, and are available to taxpayers who own or lease commercial buildings as well as building designers. For a commercial building to qualify, certain energy efficient fixtures must be put into service during the year the deduction is claimed. The following updates can qualify:

1. Interior Lighting Systems;
2. Heating, Cooling, Ventilation, and Hot Water Systems;
3. Building Envelope;

The maximum deduction is $1.80 for each square foot of the building's interior space. For example, a 4,000-square foot commercial building which qualifies for the full tax deduction would yield a $7,200 total tax deduction. Also, partial deductions of up to $0.60 for square foot are available for partially qualifying properties. To qualify for these deductions, the updates must be certified by a qualified contractor or engineer to meet certain government energy standards. Also, these are "tax deductions," not "tax credits," meaning that the taxpayer's taxable income would be effectively reduced by the amount of the allowable deduction.