Frequently Asked Questions

1. Is there a time limit?
2. How much is the tax credit?
3. How do I know exactly which tax credits I qualify for?
4. Do the tax credits only apply to my principal residence?
5. What qualifies for the tax credit?
6. Am I eligible for a tax credit if I don't owe taxes?
7. Am I eligible for a tax credit for improvements to my second home?

1. Is there a time limit? The energy efficiency improvements and products have to be placed in service during calendar year 2006 or 2007.

2. How much is the tax credit? There is a maximum of $500 for all energy-efficiency improvements, excluding solar. There are also maximums for windows ($200), furnaces or boilers ($150), advanced main air circulating fans ($50), heat pumps ($300), central air conditioners ($300) and water heaters ($300). For insulation, the tax credit is 10 percent of expenditures. In addition to this, there is a maximum $2,000 credit for qualified solar property. Call your Texas retail electricity company, otherwise known as retail electric provider, for more information.

3. How do I know exactly which tax credits I qualify for? The credit is 10 percent of expenditures on certain energy-efficiency improvements, and 100 percent of expenditures on certain residential efficiency products, with a maximum credit of $500. For example, if you spent $3,000 on energy improvements, you'd get a $300 credit. If you spent $6,000, you'd only get a $500 credit. Or, if you spent $300 on energy efficiency products, you'd get a $300 credit. If you spent $600, you'd only get a $500 credit. Or, you could have a mix of the two, but your total credit would still be limited to $500.

4. Do the tax credits only apply to my principal residence? Yes.

5. What qualifies for the tax credit?

• Qualified energy-efficiency improvements – 10 percent of expenditures
  • Building envelope components must meet prescriptive criteria of the 2000 IECC. The criteria vary by county – you can view the criteria here. (Link “here” to PDF).
  • Windows & Doors: U-factor = .35
  • Metal roof with pigmented coating – must be Energy Star
  • Windows – maximum of $200
• Residential property expenditures for energy-efficiency products
  • Energy efficient building property – maximum of $300 for any item
  • Advanced main air circulating fan – maximum of $50
  • Natural gas, propane, or oil furnace or hot water boiler – maximum of $150
• Qualified solar water heating and photovoltaic equipment
  • Not used to heat swimming pool or hot tub
  • At least 50 percent of energy used to heat water at that location must be derived from the sun
  • Photovoltaic equipment must generate electricity for use in your principal residence
  • Maximum credit is $2,000
• Energy-efficient vehicles
  • Hybrid: fuel economy credit is $400 to $2,200 and a conservation credit is $250 to $1,000
  • Lean-burn technology: $650 to $3,400
  • Fuel-cell: maximum $12,000
  • Alternative-fuel: maximum $4,000

Call your Texas retail electricity company, otherwise known as retail electric provider, for more information.

6. Am I eligible for a tax credit if I don't owe taxes? You must have a liability for the year you earned the credit (either 2006 or 2007). The energy credits are not "refundable," which means they may only be used to reduce your 2006 or 2007 tax liability. If you have no tax liability in either year, you will receive no benefit from the credits.

7. Am I eligible for a tax credit for improvements to my second home? No, the Energy Policy Act only applies to your primary residence.

General Disclaimer: The tax information contained on this Web site is only provided for general educational information purposes. It is not meant to express any legal or tax opinion or advice for your individual situation, whether personal, business or otherwise. Your individual situation may not fit the scenario discussed. If you want to know if and how this tax information might affect your individual situation, you should contact your tax advisor.

Tax Advice Disclaimer: To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that if there was any tax advice contained on this Web site, it was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending to another party any transactions or matters addressed herein.