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The Energy Policy Act (EPACT) of 2005 Provides a $2,000 Tax Credit for the Home Builder of Energy Efficient Homes 

The 2005 EPACT provides a $2,000 tax credit for the residential home builder.   The tax deduction is claimed on the IRS Form 8908 which is a business tax form.  If you are building your own home you must have a business to use the 8908 form.  Be sure to consult your tax advisor for details.

How much is the Tax Credit?

The 2005 EPACT provides a $2,000 Tax Credit to the builder for each qualified/certified home.  If you build 100 qualified homes the tax credit would be $200,000.  The tax credits can be carried forward 10 years.

Why give the builder a tax credit?

The world and it's governments are waking up to the fact that energy use is raising at rates that exceed the known supplies.  Energy conservation and environmentally friendly building and manufacturing processes are no longer just trendy, they are vital to the economy, the National security, and the way of life we have come to enjoy.  EPACT 2005 is a step in the right direction to help the builder financially afford to build a better home and still compete in the market place.  The $2,000 incentive will be consumed by the higher priced, more energy efficient equipment needed to achieve the 50% savings in energy.

What is a qualified/certified Home?

Any residential home built in the US that achieves a 50% reduction/savings in heating and cooling energy use compared to the International Energy Conservation Code (IECC) of 2004.  Also, 10% of the savings must come from the house envelope or shell.  There is no single list of components that will qualify a home.  A home's plans must be analyzed by software to determine the energy savings.

The home must be qualified/certified as achieving this savings according to the standards set by the Residential Energy Services Network (RESNET).  RESNET standards require that the home be rated using the RESNET's Home Energy Rating System (HERS) and RESNET approved software.  The HERS rating must be performed by a RESNET Certified Rater.

When is the tax credit available?

A residential home must be substantially complete after August 8, 2005, and acquired from the contractor between 12/31/2005 and 1/01/2008.  This means that the house must be sold during the two years of 2006 and 2007.  See EPACT 2005 for legislation to extend the time limit to 2010.

What components are required for the EPACT Tax Credit?

The EPACT 2005 does not specify specific components be used to reach the Federal Tax 50% level of energy savings.  It does specify that you must use RESNET approved software to compute the savings level.  The components that enter into that computation are;

• Floor construction and insulation R values (slab, crawl space, basement, etc.)

• Wall Construction and insulation R values (Frame, ICF, SIP, BATT, Blown, Sheathing, etc.)

• Doors (U value)

• Windows and Skylights (U value, SHGC value)

• Ceilings (vented, un-vented, SIP, R value, Radiant Barrier, etc.)

• HVAC equipment type and energy efficiency rating (Heat Pumps, AC, Furnace, AFUE, SEER, Thermostats, etc.)

• Duct lengths and R value

• Lights and Appliances (Fluorescent, Dishwasher, Frig, Ceiling Fan)

Other conditions that greatly affect the computations for the 50% tax level are;

• Window to wall and window to floor ratios.

• Window overhangs and shading.

• Infiltration of outside air.

• Duct Leakage.

• House Orientation.

• Quality or Grade of installation of the insulation