President Barack Obama signed the American Recovery and Reinvestment Act of 2009. For homeowners, the act increases a 10% tax credit for energy-efficiency improvements and residential energy property expenditures to a 30% tax credit, eliminates caps for specific improvements (such as windows and furnaces), and instead establishes an aggregate cap of $1,500 for all improvements, except geothermal heat pumps, placed in service in 2009 and 2010. Biomass systems must be placed in service after the act is enacted, and geothermal heat pumps must be installed by 2016 to qualify.

The residential energy efficiency tax credit minimum energy-efficiency requirements are found in the Title 26 Internal Revenue Code. The following table summarizes the minimum energy-efficiency requirements for various residential energy property expenditures.

DefinitionsAFUE (Annual Fuel Utilization Efficiency, in %)—The ratio of the amount of heat actually delivered to your house compared to the amount of fuel that you must supply to the furnace. It takes into account the cyclic on/off operation and associated energy losses of the heating unit as it responds to changes in the load.

Biomass Fuel—Any plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers.

EF (Energy Factor)—A measure of the overall efficiency of a water heater determined by comparing the energy in the heated water used daily to the total daily energy consumption of the water heater including storage losses.

LHV (Lower Heating Value)—The net or lower heating value is obtained by subtracting the latent heat of vaporization of the water vapor, formed by the combustion of the hydrogen in the fuel, from the gross or higher heating value.

SHGC (Solar Heat Gain Coefficient)—The fraction of incident solar radiation admitted through a window and subsequently released inward.

SEER (Seasonal Energy Efficiency Ratio, in Btu/watt)—The ratio of cooling output over electric power input for air conditioners that accounts for operation at different indoor and outdoor temperatures and relative humidities.

Thermal Efficiency—The efficiency of the furnace after you subtract out the energy lost up the flue, and the energy thrown off (and lost) by the jacket of the boiler or stove itself. It measures the ability of the heat exchanger to transfer heat from the combustion process to the water or steam in the boiler or air outside the stove. It is not a true indication of the boiler's/stove's fuel usage and should not be used in economic evaluations.

U-Factor (Thermal Transmission)—Measures the rate of heat transfer through a product including conductivity, the airflow around the product, and the emissivity of the glass.For more information, as well as tax forms, and frequently asked questions on various incentives, visit the ENERGY STAR Web site at energystar.gov/taxcredits. 

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