Energy Tax Credits
Sally Nelson of Nelson and Nelson CPA sent me an e-mail this morning that explains new tax incentives for energy efficient homes. After reading Sally's e-mail I immediately saw the value in sharing this information with my clients and customers. I hope you enjoy the information and feel free to forward this page to your friends.
ENERGY CREDITS
Summer may be when we think about home improvement issues, and so it is a good time to review the rules for the tax credit for energy efficient property.
The tax credit took a year off in 2008, but a new and improved version is back for 2009 and 2010. The new credit is based on 30% of costs for qualified property, up to a maximum of $1,500. Prior year credits taken do not affect this new maximum. Qualified property is property that is certified by the manufacturer to meet the required standards. The standards are so specific that without the manufacturer's certificate, it would be hard to tell if a given item qualifies for the credit or not. So it is best to ask about this up front, before you make any decision, and keep the certificate in your permanent records.
Energy Efficient Equipment includes
Electric heat pump water heaters
Natural gas, propane, or oil water heaters
Stoves using biomass fuel to heat a residence or water heater
Advanced main air circulating fans
Central air conditioners/furnaces
Building Envelope Components ("installed in a manner consistent with the manufacturer's certification") include
Insulation
Exterior windows, skylights, doors
Caution: After 5/31/09, an Energy Star label alone will not suffice to prove that these items qualify.
Metal roofs with pigmented coatings
Asphalt roofs that have cooling granules (2009 only)
As before, the property must be used on the taxpayer's principal residence located in the United States. The property must be new, and in the case of a building envelope component, must be expected to last at least five years. (A manufacturer's two-year warranty at no extra charge can be taken as evidence of durability.) The date that the expenditure qualifies is when the property is completely installed. Equipment costs can include the price of installation, however not in the case of building envelope components. Further, the envelope component must be specifically and primarily designed to reduce heat loss or gain in order to qualify: the fact that a component (siding, for example) might have an incidental beneficial effect does not count, since its main purpose is an unrelated function. (To confuse things, siding purchased with a manufacturer's certificate before 6/26/06, did count under the prior credit rules.)
Circular 230 Disclosure: Pursuant to regulations of the US Department of Treasury, it is required that we advise you that this newsletter is not intended to be used for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code on the taxpayer.
