Why Are Your New Homes Missing out on the $2000 Tax Credit?
Psssst. Want a $2000 tax credit for that energy efficient new home you’re building? A lot of home builders have taken advantage of this incentive since it was introduced in 2005. (37,506 homes got that $2000 in 2010 alone.) The requirements haven’t been so difficult for builders who do proper air sealing, use better-than-code windows, and install high-efficiency HVAC equipment. But then Congress made what seems like an insignificant change when they renewed the tax credit.
Psssst. Want a $2000 tax credit for that energy efficient new home you’re building? A lot of home builders have taken advantage of this incentive since it was introduced in 2005. (37,506 homes got that $2000 in 2010 alone.) The requirements haven’t been so difficult for builders who do proper air sealing, use better-than-code windows, and install high-efficiency HVAC equipment. But then Congress made what seems like an insignificant change when they renewed the tax credit.
The little change that hurt
We’ve had only three ratings for new homes that have qualified for the tax credit so far this year, even though our rating numbers are way up overall. As I looked into it, I found that Brett Dillon of IBS Advisors posted a video with the two main reasons homes aren’t qualifying now. But first, let’s get to that change that Congress made when they renewed the $2000 federal tax credit for new homes at the beginning of 2013.
The original tax credit required that homes be 50% more energy efficient in heating and cooling than the 2003 International Energy Conservation Code (IECC), including the 2004 supplement. When Congress renewed the tax credit in January 2013 (retroactive to 1 January 2012), they changed the reference from the 2004 IECC to the 2006 IECC.
The ’04 and ’06 codes aren’t all that different, but one critical aspect of the 50% greater energy efficiency is making the renewed tax credit a dud: One fifth of the energy savings have to come from the building enclosure. The ’06 code has two changes that make the building enclosure comparison between the rated home and the reference home less favorable.
- Infiltration
- Windows
Your $2000 just went out the window
The latter is what really hurts because homes that had less than 18% window-to-floor-area (WFA) saw a big benefit in the ’04 IECC. In that code, the reference home held at 18% WFA even when the rated home had less. If a home had only 12% WFA, therefore, it had significantly less energy consumption because walls are more efficient than windows.
In the ’06 IECC, the language reads that the reference home has window area equal to:
The proposed glazing area; where the proposed glazing area is less than 18% of the conditioned floor area
So now that home with 12% WFA is compared to a reference home with 12% WFA, and your tax credit just went out the window.
The infiltration change is important, too, but not as important as the windows.Here’s Brett’s video explaining the changes.
As he points out, home builders were having a relatively easy time qualifying their homes for the tax credit just by doing proper air sealing, using better-than-code windows, and installing high-efficiency HVAC equipment. Builders who use spray foam insulation were regularly getting the $2000 tax credit.
The shell game
Now, it’s hard to get enough improvement in the building enclosure to meet the 10% savings required by the tax credit. It doesn’t matter how good the HVAC system is anymore. As Brett says in the video, “This really is a shell game at this point.”
Related Articles
A Good Window Is Still a Poor Wall
Everything You Ever Wanted to Know about the HERS Index
What’s the Payback on Home Energy Efficiency?
Photo of cash by 401(K) 2013 from flickr.com, used under a Creative Commons license.
This Post Has 4 Comments
Comments are closed.
I’m not having a problem with
I’m not having a problem with the shell – Having to reduce the heating load in Climate Zone 2 is my problem. Our heating load is so low that it’s hard to reduce it by 50%. These homes use gas heat with a 95% efficiency, yet the credit will not apply to most of these homes. I regularly get them in the high 40’s, but only a few just inch over 50. Any suggestions?
A simple way to do this is
A simple way to do this is limit the size of HVAC equipment per climate zone. Allow so many BTU per sqft for each climate and if the system can keep up then it’s a win. Southern climates might be limited to 10BTU per ft for AC and Northern climates limited to 20BTU per foot of heating.
In the ’06 IECC, the language
In the ’06 IECC, the language reads that the reference home has window area equal to:
Is the following true for the performance path AND the prescriptive path?
The proposed glazing area; where the proposed glazing area is less than 18% of the conditioned floor area
So now that home with 12% WFA is compared to a reference home with 12% WFA, and your tax credit just went out the window.
Walt S.:
Walt S.: Heating and cooling aren’t separated in the tax credit, so if you’ve done all you can with heating, then get more reduction in the cooling energy consumption.
Bob: That’s a good idea, but the tax credit has specific requirements, and your recommendation doesn’t really address them.
Barton: I didn’t really get into the details of how you qualify for the tax credit, but you have to go through the performance path. The prescriptive path isn’t allowed because you have to compare the house going for the tax credit to a “comparable dwelling unit,” as defined in the tax credit regulations (pdf) and RESNET’s calculation procedures.