Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Expanded nonbusiness energy property credit in the American
Recovery and Reinvestment Act of 2009
Dear Reader,
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 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 U.S. owned and used by the
taxpayer as the taxpayer's principal residence. Under pre-Act law,
this credit was equal to the sum of:
(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.
I 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.