Time is Running Out for the Home Energy Property Credit

September 28th, 2010

Planning to make an “energy-saving” improvement to your home?  2010 is the final year to take advantage of the tax credit available so you will need to act quickly as there are only three months left.  Whether you simply want to cut your utility bills or winterize your home, do it soon!

The name “Home Energy Property Credit” given by Congress is not as descriptive as it could have been and is easily confused with other credits.  This credit is for energy-saving improvements to a taxpayer’s principal residence.  The credit is limited to $1,500 (30% of up to $5,000 of qualified expenditures) for improvements made in 2009 and 2010.  So, if you claimed this credit in 2009, the maximum that can be claimed in 2010 is the $1,500 maximum less any amount claimed in 2009.

Energy tax creditQualified improvements, the use of which must originate with the taxpayer, must have a reasonable expected life of at least five years, and include:

o Energy-efficient Exterior Windows and Skylights,
o Energy-efficient Exterior Doors,
o Energy-efficient Metal Roofs with appropriate pigmented coatings,
o Energy-efficient Asphalt Roofing with appropriate cooling granules,
o Energy-efficient Heating Systems,
o Energy-efficient Air Conditioning Systems and
o Insulation Materials or Systems designed to reduce heat loss or gain.

Credit is not allowed for on-site preparation, assembly or the installation of the component.  It is a non-refundable personal credit; thus, the credit can only be used to bring your tax (including the alternative minimum tax) down to zero.  Any excess is not refundable and cannot be carried over to a subsequent year.

Each manufacturer must comply with the government’s established standards for the product to be qualified as “energy-efficient.”  And each manufacturer who meets those standards will provide a written certification that the product meets the definition of qualified property under IRC Sec 25C. Taxpayers cannot simply rely on an Energy Star label in claiming the Sec 25C credit for exterior windows and skylights.

Reliance on the certification is allowed only if installation of the component is consistent with the certification (for example, the item must be installed in the appropriate climate zone identified in the certificate statement).

Caution – At the time this article was prepared, it was uncertain if this credit will offset the alternative minimum tax (AMT).  The law allowing it to offset the AMT in prior years expired for years after 2009 and will require Congressional action to extend.

Don’t confuse this credit with the “Residential Energy-Efficient Property Credit” which also provides a 30% tax credit for energy-generation installations (such as solar, fuel cells, geothermal and wind energy).  That credit offsets the AMT, is available through 2016, and has no annual maximum credit.

If you have questions related to this credit, please give this office a call.

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