The holiday season is upon us, and though we’d much rather be thinking about sitting by the fire with a hot chocolate, there is only a few months left to consider tax savings opportunities for 2009. Below is a discussion regarding two tax credits that were expanded in October 2009 to help homeowners winterize their homes and save money on energy costs.
Non-business Energy Property Credit:
The Non-business Energy Property Tax Credit is available to help lower the cost of certain qualified high-efficiency property. This credit can be claimed in 2009 or 2010 and is non-refundable (so if your tax liability is lower than the credit available, you would only receive a credit to off-set your tax liability). The credit is calculated by taking 30%, up to $1,500, of the total energy improvements and expenditures paid in 2009 or 2010. Taxpayers would be allowed to take the credit in both years (2009, 2010) unless they claimed the entire $1,500 in 2009. The high-efficiency property must be “placed in service” by December 31, 2010. There are no income limitations for the Non-business Energy Property Credit however it is available only to taxpayers with existing homes.
Residential Energy Efficient Property Credit:
The Residential Energy Efficient Property Credit is available to help lower the cost of certain qualified alternative energy equipment and its installation. This credit can be claimed in 2009 through 2016 tax years. This credit is also non-refundable and is calculated by taking 30% of what a homeowner spends on qualifying property and the related instillation (such as solar electric systems and solar hot water heaters). It’s important to note that not all energy-efficient improvements qualify so it’s important to check the manufacturer’s tax credit certification statement before purchasing and installing these costly improvements. There are no income limitations for the Residential Energy Efficient Property Credit and there is currently no cap on the amount of credit available, except in the case of fuel cell property. Unlike the Non-business Energy Property Credit, this credit can be used both by taxpayers on their existing homes or on a home that is in construction for a taxpayer.
A taxpayer may claim BOTH of these credits if they qualify.
It is important to note that the Internal Revenue Service has increased its standards for products to be qualified as energy-efficient. For example, taxpayers are required to install only doors and windows with a U-Factor and a Solar Heat Gain Coefficient (SHGC) of .30. Therefore anything above .30 does not qualify as an energy-efficient product. Taxpayers should make sure that the labels/stickers on doors and windows purchased indicate the U-Factor and SHGC information and that the relative values will qualify for the tax credit. All receipts, stickers, and labels should be saved as documentation of qualification.
If you would like more details about tax saving energy credits, please call our offices and ask to speak to one of our shareholders or email us at info@taxwarriors.com.