Tax Topic

Residential Energy Credits


1. Personal Energy Property Credit:
Taxpayers can claim a credit for certain home improvements placed in service in 2016. The credit is up to 10% of the cost of qualified energy efficient improvements up to a maximum lifetime credit of $500. There are also various credit limits on specific qualified items, for example: $150 for furnaces and boilers, $200 for windows, $300 water heaters. However, if you already claimed at least this much in prior years for this credit, the credit is not available. The credit applies to improvements such as insulation, energy efficient exterior windows and energy efficient heating and air conditioning systems. There are no income limits and the credit can offset both regular tax and AMT. Some of the credits take into account installation costs; others do not. Improvements must be for an existing home in the U.S. that is your principal residence and must have been completed by December 31, 2016 to claim the credit on the 2016 tax return. New construction, vacation and rental homes do not apply. Not all Energy Star products qualify for the tax credit. The manufacturer should provide you with documentation certifying qualification.

2. Residential Energy Efficient Property Credit:
This energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar energy systems (water heating and electricity), fuel cells, geothermal heat pumps and small wind energy systems. The ARRA Act of 2009 removed some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property (no dollar limit except for fuel cells). The credit can offset both regular tax and AMT. The credit is for personal property in the U.S. (except for the fuel cell credit which is for a principal residence only). The credit is available for existing homes and new construction; however rental homes do not qualify. Again, the work must been completed by December 31, 2016 to claim the credit on the 2016 tax return.

Here is a link to the IRS guidelines for the Energy Provisions of the American Recovery and Reinvestment Act of 2009: http://www.irs.gov/uac/Energy-Incentives-for-Individuals-in-the-American-Recovery-and-Reinvestment-Act

Here is a link the Energy Star website: http://www.energystar.gov/index.cfm?c=tax_credits.tx_index


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