Nonbusiness Energy Property Tax Credit

Part of a series on Taxation
Taxation in the United States
Federal taxation
Authority · History Internal Revenue Service (Court • Forms • Code • Revenue) Taxpayer standing Income tax · Payroll tax Alternative Minimum Tax Estate tax · Excise tax Gift tax · Corporate tax Capital gains tax
State and local taxation
State income tax State tax levels Sales tax · Use tax Property tax Land value tax
Federal tax reform Automated payment transaction tax Competitive Tax Plan Efficient Taxation of Income Hall–Rabushka flat tax Taxpayer Choice Act USA Tax · Value Added Tax FairTax · Flat tax
Tax protesting History America: Freedom to Fascism The Law that Never Was Cheek v. United States Tax protesters Irwin Schiff Richard M. Simkanin Robert Clarkson Tom Cryer Vivien Kellems Wayne C. Bentson Wesley Snipes Tax protester arguments Constitutional 16th Amendment Statutory · Conspiracy
Taxation by country Australia British Virgin Islands Canada · China Colombia · France Germany · Hong Kong India · Indonesia Ireland · Netherlands New Zealand · Peru Russia · Singapore Switzerland · Tanzania United Kingdom United States European Union Tax rates around the world Tax revenue as % of GDP v · d · e
v · d · e

The Nonbusiness energy property tax credit, in the United States, provides a nonrefundable personal tax credit for Federal income tax purposes, for making a home more energy efficient. (Unlike a deduction, which lowers taxable income, a tax credit reduces the actual tax paid, dollar-for-dollar.) This credit was added to the Internal Revenue Code by the Energy Policy Act of 2005.^[1]

Credit

Nonbusiness energy property provides a 10 percent credit for buying qualified energy efficiency improvements^[2] and provides credits in various amounts for costs relating to residential energy property expenses.26 U.S.C. § 25C(a)(2). Labor costs for onsite preparation, assembly, or original installation are included as eligible expenses.^[3]

Eligibility

For an improvement to be eligible for the credit it must meet the following qualifications: (1) a component must meet or exceed the criteria established by the 2009 International Energy Conservation Code; (2) component is installed in or on a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayer’s principal residence; (3) the original use of such component commences with the taxpayer and (4) such component reasonably can be expected to remain in use for at least 5 years. ^[4]

Residential energy property expenditures are eligible for the credit if the purchase: (1) is installed on or in connection with a dwelling unit located in the United States and owned by the taxpayer and used as his principal residence (section 121); (2) the item is originally placed in service by the taxpayer and (3) it is qualified energy property as defined by 26 U.S.C. § 25C(d)(2)(a) that meets certain performance and quality standards established by the code or by the Secretary.^[5]

Limits

A tax credit of up to $1,500 is available to individuals for nonbusiness energy property, such as residential exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners, and water heaters.

a. The credit is 30% of qualified costs. b. There is a lifetime credit of $1,500. c. The improvements must be installed in the taxpayer's principal residence in the United States.

Termination of Credit

Items must be placed in service after Dec. 31, 2005 and before Jan. 1, 2008 to be eligible for the credit. ^[6]

References

1. ^ .01 Section 1333 of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594.
2. ^ 26 U.S.C. § 25C(a)(1).
3. ^ 26 U.S.C. § 25C(d)
4. ^ 26 U.S.C. § 25C(c)(1).
5. ^ 26 U.S.C. § 25C(d)(1)
6. ^ 26 U.S.C. § 25C(g).

External links

1. Energy Star-Federal Tax Credits for Energy Efficiency
2. Treasury and IRS Provide Guidance for energy Credits for Homeowners
3. (Notice 2006-26) Guidance issued by Treasury Department and the IRS for certification of energy efficiency
4. IRS Form 5695(Draft)