The Stimulus Plan's New Tax Credits and More for Green Building Projects

The way the tax credit works for co-ops and condos is that residents can take the deduction on their personal income taxes based on their share (if a co-op) or divided evenly among condo owners. Each individual taxpayer can take up to the $1,500 cap.

One new effect of the stimulus package is with projects funded by subsidized low-interest loans, such as those offered by the New York State Energy Research and Development Authority (NYSERDA). Previously, if you took a NYSERDA loan you couldn't also get a federal tax credit. Now you can.

"Overall, we think it's promising," Hanis says of the tax credits in the stimulus package. "But it all depends on how the program is administered."

Wish Upon an Energy Star

Your first stop to learn the details is the Energy Star website. Scroll down to the "Tax Credits" section to see a chart outlining your options. Among them:

• If your building purchases and installs certain Energy Star-rated products such as windows and doors, roofing, insulation, HVAC systems and water heaters, you can get a credit of 30 percent of the project cost, with a $1,500 cap. (If your building takes on multiple projects, the cap is $1,500 per person filing taxes.)

• When it comes to solar energy (solar water heating and photovoltaic systems) there's no cap! You can deduct 30 percent of the total cost.

• There's also a 30 percent tax credit with no cap for costs associated with geothermal heat pumps and microturbine systems.

There are some restrictions. According to Energy Star website manager Karen Schneider, projects must be placed in service by a certain period of time. For instance, you have until December 31, 2016, for photovoltaic (PV) systems. Also, those who file taxes can't get more back in tax credit than they paid to the federal government.

As well, here are some common obstacles you might face:

Windows. Not all improvements that qualify under Energy Star apply to co-ops and condos. Take windows, for example. The products that meet the specifications for the tax credits are made of vinyl product, not acceptable to most New York City co-ops and condos. Vinyl-framed windows are more environmentally friendly because they conduct less heat and cold than aluminum, but they're often too small for condo and co-op buildings. (Aluminum window frames are stronger and can accommodate a larger window. The maximum size for a vinyl window is about three feet wide by about four feet high.)

Green roofs. Two of the biggest obstacles here are the upfront cost and the faltering economy, says James Friedman, owner of FixARoof (a.k.a. FixARoof by Friedmans). Green roofing, which includes layers of Energy Star-rated roofing products and vegetation, can cost up to 50 percent more than a traditional job. But the return on investment is seven to ten years and green roofs last three or four times longer than traditional roofs. "It's an all-around savings but you still have to convince board members," Friedman says.

Solar power. Anthony Pereira, president and CEO of the PV installer altPower, says solar doesn't work for everyone because many buildings are in shadow and also have limited roof space. In addition, the upfront cost makes such projects a tough sell, despite the tax breaks.

HVAC upgrade. These can be complicated, says Roger Macaluso, president of Blue Water Plumbing and Heating, because many Energy Star products simply can't be installed in an older building without massive renovations. You generally can't just remove an old hot-water heater or oil boiler and plug in a new (tax-break-qualified) energy-efficient model. Every building is different, so boards and managing agents need to consult with a contractor and probably a mechanical engineer, which costs money.

Equitable distribution of tax credits. Let's say a board decides to take on a green project and levy an assessment to pay for it. If a shareholder has more shares than his or her neighbor, he will pay more of an assessment but he'll still get the same amount in tax credit as the resident with fewer shares.

Such complications make it even more important for buildings and boards to consult with experts, says Stephen Beer, a partner at the CPA firm Czarnowski & Beer. "It's important to embrace your professionals as you go into a project. It's so complicated and requires so much research that you have to get all your professionals involved and get their two cents."

And those two cents might save you many, many, many more.

Illustration by Marcellus Hall

Adapted from Habitat May 2009. For the complete article and more, join our Archive >>