Home Energy Credits-Favorable Changes

March 6th, 2009

The “American Recovery and Reinvestment Act of 2009” (the 2009 Economic Stimulus Act) expanded the residential energy improvement credit for 2009 and 2010 (this credit was last available in 2007) and extended and expanded the tax credit for residential solar and fuel cell equipment through 2016.  This gives taxpayers who want to “go green” a chance to offset some of the cost of going green with tax credits.

These are two distinctly different credits with different requirements and limitations.  The following is an overview of these credits. However, you are strongly urged to contact this office before entering into any contractual arrangements to install any of these energy items to first verify what your tax benefit might be.

• Tax Credit for Residential Energy Improvements – Energy improvements to a principal residence located in the United States and placed in service during 2009 and 2010 qualify for the residential energy improvements credit. The credit is 30% of the cost of:

o Qualified advanced main air circulating fan;
o Qualified natural gas, propane, or oil furnace;
o Qualified natural gas, propane, or oil hot water boiler;
o Qualified energy efficient heat pumps;
o Qualified energy efficient water heaters;
o Qualified energy efficient central air conditioners;
o Qualifying insulation;
o Qualified exterior windows including skylights;
o Qualified exterior doors;
o Qualified metal roofs coated with heat-reduction pigments; and
o Qualified asphalt roofing with appropriate cooling granules.

• Tax Credit for Residential Energy Efficient Property (REEP credit) – The “American Recovery and Reinvestment Act of 2009” (the 2009 economic stimulus act) removed the credit caps for certain equipment.  The caps reaming are noted.   A 30% credit applies to the following items placed in service after 2008 and before the end of 2016:

o Qualified solar water heaters;
o Residential solar electric systems;
o Fuel cell equipment – with a maximum credit of $500 for each half-kilowatt of capacity;
o Qualified wind energy equipment; and
o Qualified geothermal energy equipment

Labor costs for onsite installation and for piping and wiring connections are qualifying costs for these credits.  However, the credits do not apply to equipment used to heat swimming pools or hot tubs.

Credit limitations – Although these credits can be used to offset both the regular tax and AMT, they are nonrefundable personal credits that can only reduce a taxpayer’s tax to zero, and any remaining balance is not refundable.  If the amount of the credit for the residential energy efficient property credit (REEP – i.e., the credit for residential solar and fuel cell equipment and wind/geothermal energy equipment) exceeds the taxpayer’s tax after subtracting other nonrefundable personal credits, the excess can be carried to the next tax year and is added to that year’s allowable credit.

Before entering into a contractual arrangement to install any of the energy-efficient equipment listed above, please contact this office to first verify what your tax benefit might be.

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