Energy Credit

Energy Incentives for Individuals in the American
Recovery and Reinvestment Act

The American Recovery and Reinvestment Act provides numerous tax incentives for individuals to invest in energy-efficient products.

Residential Energy Property Credit (Section 1121): The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010. The credit applies to improvements such as adding insulation, energy efficient exterior windows, exterior doors, skylights, water heaters, roofs and energy-efficient heating and air conditioning systems.

Until the guidance is released, homeowners generally may continue to rely on manufacturers’ certifications that were provided under the old guidance. For exterior windows and skylights, homeowners may continue to rely on Energy Star labels in determining whether property purchased before June 1, 2009, qualifies for the credit.

You may be able to take these credits if you made energy saving improvements to your personal residence. This credit is limited to improvements placed in service during 2009 and 2010 up to a total credit of $1,500 for both tax years combined. The American Recovery and Reinvestment Act eliminates the dollar limit on the 30 percent tax credit for alternative energy equipment, such as solar water heaters, geothermal heat pumps and small wind turbines, installed in a home. The cap generally has been eliminated for these improvements beginning in the 2009 tax year.

Residential Energy Efficient Property Credit (Section 1122): This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property. You may be able to take these credits if you made energy saving improvements to your personal residence.

The information on this web site for general guidance only. This general information is provided to represent a good faith effort to provide accurate and complete tax information. The information provided herein should not be used as a substitute for consultation with professional advisers. Every situation may be unique, please contact us to discuss your particular situation.