There are many people in the world who understand the environmental benefits of energy efficiency. It helps in reduction in generation of electricity which is based on carbon dioxide emissions and it also helps in reduction in our dependency on the fossil fuels. But there are also many people in the world who do not understand all the real financial benefits of energy efficiency. People know that energy efficiency helps in saving money with the help of reducing the use of electricity. But people do not know that the government also offers tax credits for energy efficiency which are also known as federal tax credits for energy efficiency.
What Are the Tax Credits for Energy Efficiency
A tax credit provided by the federal government can offer real consumer savings to the people. This can be done during the short term whenever a person files their income tax. The tax credits are received unlike the deductions which only reduce the amount of income which is subject to taxation and a tax credit helps in directly reducing the tax itself. Presently, the tax credits for energy efficiency which are also known as tax incentives for green building are available under the Energy Policy Act of 2005. Though there are many tax credits which have expired, there are already some of the new legislations passed through the House to provide another 18.1 billion in the renewable energy tax incentives.
Different Kinds of Tax Credits Available
The tax credits are offered to the consumers in the following categories
- Improvements of the house
- Solar energy systems
- Fuel cells
The home builders, commercial building owners and appliance manufacturers also qualify for this unique federal tax credits for energy efficiency.
What Qualifies For a Tax Credit
Though some of the energy star rated products qualify for this kind of tax credits, but it is highly important to realize it. In order to maximize the energy efficiency, these tax credits have been reserved for only those products that offer the very highest efficiency levels. These products are typically more expensive as compared to the other products available in the market.
Where Does IRS Fit In?
While the Energy Policy Act of 2005 and the new Renewable Energy Tax Incentives are still to be passed through the Senate and signed by the President before becoming the law provides the Tax Credit specifications, the IRS rules were to determine what qualifies for the tax incentives for green building. Energy efficiency is considered to be an effective strategy which helps in effectively fighting with global warming.