Cellulose Insulation Manufacturers Association

Fiscal Cliff Deal Saved Consumer Energy Tax Credits

Consumers who invested in new insulation, water heaters, air conditioners, boilers and other qualifying appliances will be able to claim the 25C federal tax credit when they file their 2012 taxes.

Image of 1040 IRS Form
Thanks to the last ditch effort on the compromise “fiscal cliff” deal between congress and the white house at least one of the more logical tax incentives that was allowed to expire in 2011 has been restored. H.R. 8, the American Tax Payer Relief Act more commonly known as the Fiscal Cliff deal, fully restored the Residential Energy Efficiency Tax Credit. This means home owners who made qualifying energy-efficient improvements to their homes in 2012, or do so in 2013, can once again get a dollar-for-dollar reduction on their federal income taxes.

Fortunately for home owners, this includes the credits for insulation. One of the quickest recoveries on investment for energy-efficient home improvements is adding insulation. It delivers immediate savings allowing the cost to be recouped in just a few years. And, unlike an appliance which will eventually wear out, cellulose insulation typically will last the life of the dwelling.

Here are the details on these incentives:

• 10 percent of the cost of insulation materials and systems, not including installation. (Credits for insulation are capped at $500.)

• 10 percent of the cost of qualifying exterior doors, windows and skylights, not including installation. (Credits for windows and skylights are capped at $200.)

• 10 percent of the cost of metal and asphalt roofs specially designed to keep builders cooler, not including installation.

• $50 for a furnace fan called a main air circulating fan.

• $150 for a natural gas, propane or oil furnace or hot water boiler with an annual fuel utilization efficiency rate (AFUE) of 95 percent or greater.

• $300 for an electric heat pump water heater with an energy factor of at least 2.0.

• $300 for a highly efficient electric heat pump.

• $300 for a highly efficient central air conditioner.

• $300 for a natural gas, propane or oil water heater with an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent.

• $300 for a biomass stove.

The improvements must be made to the taxpayer’s principal residence and must be placed in service by the end of 2013.

The American Tax Payer Relief Act also reinstated tax credits of up to $2,000 for builders that construct an all new energy-efficient homes. This provides a blanket incentive for builders and home buyers who meet the requirements to qualify. Including high quality insulation can help to attain the efficiency in a more cost efficient manner. More importantly, the reduction on monthly home energy bills that is realized when a home is properly insulated will quickly dwarf the value of the tax credits on appliances.

When the house includes The Greenest of the Green cellulose insulation there is also a huge added environmental benefit. It takes a faction of the energy required to produce other types of insulation thereby helping to reduce greenhouse gasses and overall energy use in the country. It’s up to 85% recycled paper (predominantly post-consumer waste newspapers) making it one of the highest recycled-content building materials. And because paper is made from wood, cellulose insulation sequesters carbon in the attic and walls for the life of the dwelling instead of allowing it to enter the atmosphere if that paper were sent to landfills.

Perhaps it’s time for the congress to consider making these tax credits permanent. At least for insulation. The cost of tax incentives to insulate houses in the U.S. would easily be offset by reduced energy consumption, less dependency on foreign oil and lower carbon emissions. With the constant discussion in Washington about reducing dependence on foreign oil, and the continuing cry for lowering carbon emissions, it just makes sense to continue encouraging existing home owners to bring the millions of under-insulated older houses up to the recommended level of insulation.

Let us know what you think. Reply with a comment below. If you agree, let your senators and representatives know you support the continued extension of tax credits for insulation.