February 18,
2009
Dear Client,
Unlike past
efforts by Congress to use taxes to spur energy efficiency by homeowners,
provisions in the recently enacted “American Recovery and Reinvestment Act of
2009” (the 2009 economic stimulus act) are substantial. These include an
increased credit of 30% of the cost of residential energy-efficient
improvements such as more efficient furnaces, heat pumps and air conditioners,
as well as energy-tight windows and more insulation, and a tripling of the
maximum credit for a household to $1,500. Here are the details.
Background.
Individual
taxpayers are allowed a personal tax credit, known as the nonbusiness
energy property credit, for energy efficient improvements to a dwelling unit in
the
(1) 10% of the amount paid or incurred by the
taxpayer for qualified energy efficiency improvements (i.e., building envelope
components meeting certain requirements) installed during the tax year, and
(2) the amount of residential energy property
expenditures (i.e., $50 for each advanced main air circulating fan, $150 for
each qualified natural gas, propane, or oil furnace or hot water boiler, and $300
for qualified energy efficient property, including heat pumps, water heaters,
and central air conditioners) paid or incurred by the taxpayer during the tax
year.
Under pre-Act
law, the credit was subject to a lifetime cap. The total credit for all tax
years couldn't exceed $500, no more than $200 of which could be for
expenditures on windows.
The credit was
also set to expire at the end of this year.
New law.
The new
legislation modifies and extends the nonbusiness
energy property credit in the following ways:
... the 10% credit
rate is increased to 30%;
... the dollar limitations on residential
energy property expenditures have been eliminated; instead, all energy property
that was previously eligible for the $50, $150, and $300 credits is instead eligible
for a 30% credit;
... the $500 lifetime
cap ($200 for windows) is eliminated and replaced with an aggregate $1,500 cap
for 2009 and 2010; and
... the credit is
extended for one year, through Dec. 31, 2010.
We hope this
information is helpful. If you would like more details about this or any other
aspect of the new law, please do not hesitate to call.
Very truly yours,
Gosling & Company, P.C.
Certified Public Accountants
IRS
Circular 230 Disclosure: To ensure
compliance with requirements imposed by the IRS, we inform you that any U.S.
federal tax advice contained in this communication (including any attachments)
is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii)
promoting, marketing or recommending to another party any transaction or matter
addressed herein or in any attachment hereto.