Neighborhood Electric Vehicle tax credit
Update June 2016 — For updated information on the residential energy property credit, please see Energy Incentives for Individuals: Residential Property Updated Questions and Answers. For updated information on plug-in vehicles, please see Plug-In Electric Drive Vehicle Credit (IRC 30D).
Q. How has the American Recovery and Reinvestment Act of 2009 affected the tax credits for energy efficient home improvements?
A. 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.
A similar credit was available for 2007, but was not available in 2008. Homeowners should be aware that the standards in the new law are higher than the standards for the credit that was available in 2007 for products that qualify as “energy efficient” for purposes of this tax credit. The IRS has issued guidance that will allow manufacturers to certify that their products meet these new standards. See Notice 2009-53.
Q. What improvements qualify for the enhanced residential energy property credit for homeowners?
A. In 2009 and 2010, an individual may claim a credit for 30 percent of the cost (subject to the overall credit limit of $1, 500) for the installation of the following qualifying products:
- Energy-efficient exterior windows, doors and skylights
- Energy-efficient heating and air conditioning systems
- Water heaters (natural gas, propane or oil)
- Roofs (metal and asphalt)
- Biomass stoves
Q. Who qualifies to claim a residential energy property credit? Are there limitations?
A. 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 residential energy property credit is non refundable. A nonrefundable tax credit allows taxpayers to lower their tax liability to zero, but not below zero.
Q. Are there incentives for making your home energy efficient by installing alternative energy equipment — for example, installing a solar hot water heater?
A. Yes, the residential energy efficiency property credit has been enhanced to remove some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property. Qualifying property includes solar water heaters, geothermal heat pumps and small wind turbines, installed in a home. For more information, see Notice 2009-41, which explains the effects of this change.
Q. Is there a limitation on the amount of the residential energy efficiency property credit?
A. The American Recovery and Reinvestment Act (ARRA) 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.
ARRA provides for a uniform credit of 30 percent of the cost of qualifying improvements up to $1, 500, such as adding insulation, energy-efficient exterior windows, doors and skylights, certain water heaters, metal and asphalt roofs, biomass stoves and energy-efficient heating and air conditioning systems.
Q. For tax years beginning in 2009, the law allows a 30 percent tax credit, with no cap, to a homeowner for the cost, including installation costs, of solar electric equipment (photovoltaic). This credit provides a great incentive to homebuilders and homebuyers to install this equipment. For purposes of this tax credit, does the cost to the homebuyer of the installed solar electric equipment include a builder’s normal construction mark-up?
A. The homebuyer must make a reasonable allocation of the cost of a home to determine the cost allocable to the solar electric equipment on which a homebuyer computes this credit. The cost of the solar electric equipment may include a reasonable allocation of the homebuilder’s construction mark-up. The homebuilder should provide the buyer with information necessary to make this allocation.