Non-Business Energy Tax Credit

Time is running out to take advantage of energy saving investments in your principle residence. The Non-business Energy Property Tax Credit was increased as part of the American Recovery and Reinvestment Act of 2009. I've written about these before (and here)but wanted to bring them to your attention once again as they are set to expire at year end.

First, to qualify, the improvements must be placed in service before January 1, 2011.

Here are some of the important facts to keep in mind:

• The law increased the credit rate to 30 percent of the cost of all qualifying improvements and raised the credit limit to $1,500 total for 2009 and 2010 combined
• The credit applies to improvements in insulation, energy-efficient windows, and energy-efficient heating and air conditioning systems.
• For purposes of the credit, to qualify as "energy efficient", the product must generally meet certain standards. If you have questions, make sure you make the determination before you purchase the product to make sure you qualify.
• Manufacturers must certify that their products meet the standards and must provide a written statement to the taxpayer, either with the product or on their website.
• The improvements must be made to your principle residence located in the United States. A second home or rental property would not qualify for the particular credit.
• You must claim the credit on the tax return for the year that the improvements were made.

Oregon residents should also determine if their investment would qualify for the Oregon Residential Energy Tax Credit (RETC). Oregon residents might also qualify for special incentives from the Energy Trust of Oregon.

You should also check the Database for State Incentive for Renewables & Efficiency to what other local incentives might be available around the country.

Green Tax Incentives for the Home (Part I)

There are federal tax credits to help you green your home. IRC Sec. 25C and IRC Sec. 25D provide for the federal credits. I'll cover IRC Sec. 25C in this post and IRC Sec. 25D in the next post.

IRC Sec. 25C provides Non-business Homeowners Energy Credits of 30 percent up to $1,500 aggregate cap. This credit is for expenditures made in 2009 and 2010. It is set to expire at the end of this year. IRC Sec. 25C is for improvements to a principle residence.

The credit is for:

• Qualified energy efficiency improvements, and
• Residential energy property expenditures

"Qualified energy efficiency improvements" is mostly about improvements to the building envelope. Windows, skylights, roofs, insulation, and doors would all qualify if they meet the appropriate performance standards.

"Residential energy property expenditures" is where you get your credit for furnaces, boilers, heat pumps, air conditioners, hot water heaters, fans, and the like. This equipment must meet performance and quality standards to qualify.

The IRS issued Notice 2009-53 to provide interim guidance on the credit. One thing to note is that the IRS cautioned that Energy Star certification doesn't establish that a product is qualified for credit, especially with regards to exterior windows and skylights placed in service after enactment of the American Recovery and Reinvestment Act of 2009.

Taxpayers should make sure they receive proper certification from the manufacturer for property on which they plan to take the credit.