Time to Go Green?

HBS Tax Preparation Services

Are you planning some summer-time home renovations?  Tired of paying high energy costs?  Uncle Sam has some good news for you.  He wants to pay you back for home remodeling projects that reduce your electric and heating bill.  The American Recovery and Reinvestment Act of 2009 includes tax credits to reimburse up to 30% of materials cost on qualifying energy-saving projects.  The two types of credits: The Residential Energy Property Credit (REPC) and the Residential Energy Efficiency Property Credit.  In this article I will explain how the Residential Energy Property Credit can help you save some “green” while helping the environment. 

The Residential Energy Property Credit applies to existing homes only.  The credit reimburses taxpayers for 30% of qualifying, energy-saving home improvements “placed in service” (the IRS defines placed in service as “being ready and available for use”) for the two years between January 1st 2009 and December 31, 2010.  The total credit for all improvements cannot exceed $1,500 total for the two years combined.  Keep this in mind if planning more than one project.  You can claim some or all of the credit each year but once you spend $5,000 on qualifying projects, the credit is maxed for both years ($5,000 * 30% = $1,500).

Below is a list of projects and products that qualify for the credit. 

Installation costs of HVAC systems, water heaters, and stoves can be included when determining the credit.  Installation costs for windows, doors, insulation and roofs, however, do not qualify. 

The REPC is non-refundable (that is, it will reduce your tax bill but will not cause a refund if you owe no tax) and applies only to one’s primary residence, including mobile homes.  If you are married and file taxes jointly you are only allowed a total credit of $1,500 for the two years the REPC is in effect.  If you file separately, however, you could each qualify for the $1,500 credit so long as you don’t claim the same expenses.  Two unmarried individuals who jointly own the same primary residence will each qualify for the $1,500 limit.  There are no income limitations on the credit. 

Finally, and most importantly, you must obtain a Manufacturer’s Certification Statement to receive the credit.  If a Manufacturer’s Certificate Statement is not available, there is no credit for that product.  To substantiate your credit be sure to keep the manufacturers certification and your purchase receipt(s).

In this article we have discussed the Residential Energy Property Credit.  This credit should not be confused with the Residential Energy Efficiency Property Credit which applies to solar, wind and geothermal systems.  We will discuss this credit in a later column.  If interested in learning more about the credit or the energy specifications I have cited please log onto energystar.gov. 

 

Brett Hersh's avatar
  • Author: Brett Hersh
  • Bio: Brett Hersh, EA, MBA, is the owner of HBS TAX & Small Business Experts. He is an Enrolled Agent (EA) with the IRS and licensed by the US Treasury Department to prepare all tax returns and represent taxpayers before the IRS for audits, collections and appeals. He is also Dave Ramsey’s ELP for Tax and Accounting, a continuing education instructor for tax professionals through Lorman Education, and a local speaker/presenter on the topics of tax and business growth. He can be reached at (304) 267-2594.