Over the past several years that the residential energy credits have existed there have been significant changes. For starters the credit was eliminated for residential purposes other than solar for tax year 2008. However the credit came back in 2009 through the American Recovery and Reinvestment Act that extended it’s use into tax year 2010 as well.
The American Recovery and Reinvestment Act was signed into law by President Obama on February 17, 2009. The bill was created to provide a stimulus to the U.S. economy and it included federal tax cuts, expansion of unemployment benefits and other social provisions, including domestic spending in education, health care, and infrastructure, including the energy sector.
The following are some key points about the Nonbusiness Energy Property Credit:
- The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
- The credit applies to improvements such as adding insulation, energy-efficient exterior windows and doors, energy efficient heating and air conditioning systems, and certain metal and asphalt roofs.
- The improvements must be made to the taxpayer’s principal residence located in the United States (must be existing home).
- Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
The following are some key points about the Residential Energy Efficient Property Credit:
- The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.
- The credit is available to help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.
- Both existing homes and new construction qualify.
- Both principal residences and second homes qualify (rental property does not qualify).
- Qualifying improvements to the taxpayer’s home in the United States must be placed in service before January 1, 2017.
Energy credits must be taken in the tax year which the installation was completed. Not all energy efficient improvements qualify for this credit and those that do must have certification from the manufacturer that can be found either in the packaging or on the manufacturers website. If you are considering making improvements in the coming year you should discuss this with a tax professional as some of these credits are set to expire after tax year 2010.
Source: IRS Key Points to Energy Credits