What are the Different Tax Credits for Energy Efficiency?

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  • Written By: Elise Czajkowski
  • Edited By: Susan Barwick
  • Last Modified Date: 20 September 2019
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The main types of tax credits for energy efficiency for consumers in the United States reward taxpayers for switching to energy efficient ways of heating and cooling homes. Tax credits are also available to businesses, particularly home builders and certain manufacturers. Some tax credits are also available for switching to alternative fuel vehicles.

For homes, federal tax credits reward heating alternatives that have a high thermal efficiency rating. This includes biomass stoves, which burn fuel such as plants, fibers, and wood products, and air source heat pumps, which move heated air rather than generating heat itself. It also rewards the use of lower energy water heaters and geothermal heat pumps, which circulate air into and out of the ground. Tax credits for energy efficiency are also given for air conditioning units which use less energy.

A consumer tax credits for energy efficiency is also available for construction and insulation. Adding certain types of insulation can make homes more energy efficient, as can certain doors and windows. Tax credits are also awarded for using roofing products that reflect the sun's rays instead of absorbing them.

Tax credits for energy efficiency are also given to homes which employ alternative forms of energy production. This can include installing solar panels, wind turbines, or fuel cells to generate power for a home. Construction companies, particularly home builders, are eligible for tax credits when they build energy efficient buildings.


Businesses can also benefit from tax credits for energy efficiency. Implementing energy efficient measures in commercial and corporate buildings allows businesses to receive credits. In addition, manufacturers of certain products, particularly energy efficient consumer appliances, are eligible for tax credits.

Consumers and businesses can also be eligible for tax credits related to vehicles. Credits are awarded for purchasing or leasing hybrid gas-electric cars, plug-in electric cars, and other alternative fuel vehicles. The amount of the tax credit depends on the vehicle's weight and fuel efficiency.

Tax credits for energy efficiency vary dramatically. Federal tax credits and the qualifications for those credits can change yearly. States may provide extra or different incentives for energy efficiency. It is important to look at the requirements necessary to qualify for a tax credit and the deadline for meeting it before making any decisions.

Generally, tax credits for energy efficiency requires the use of Energy Star products. Energy Star is an international program that rates the energy efficiency of different products. Goods that rank in the top 25 percent of energy efficiency are awarded Energy Star status.


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