by Richard Schneider
Emeritus Professor of Accounting
For the tax years 2009 and 2010 you can get up to a $1,500 ‘Nonbusiness Energy Property Credit’, for saving energy by installing energy efficient improvements and/or property in your main home. The ‘Nonbusiness Energy Property Credit’ is added to the ‘Residential Energy Efficient Property Credit’ that has been available for installing solar, geothermal, wind, and fuel cell energy saving devices.
The ‘Nonbusiness Energy Property Credit’ covers the replacement of windows, exterior doors, garage doors, your furnace, air conditioner, or water heater, or if you add more insulation. The item(s) must meet certain standards, your dealer or contractor should know if the property qualifies. The manufacturer will provide a certificate of qualification.
For doors, windows and insulation you can list the cost of material, but not the cost of labor to install. For the furnace and air conditioner you can also count the cost of installing the unit.
The credit is equal to 30% of the qualified cost and limited to $1,500 in total for the two years of 2009 and 2010. Use IRS form 5695 Part 1. You may qualify for a larger credit if you are married and each lives in a separate main residence. The credit offsets tax only, and is not a refundable credit, like the earned income tax credit, any unused credit amount is lost.
If you didn’t make the improvements in 2009, or didn’t use up the full $1,500 credit, you can still make the improvements in 2010 and take the credit on the 2010 tax return. It may be time to replace the old furnace, AC, or leaky windows or front door. We replaced garage doors, and a storm door for a total cost of $1,200. Our credit is 30% of the $1,200 which equals $360. Our net cost than was $840 ($1,200 - $360).
If you are more ambitious and decide to tackle solar, geothermal or fuel cells for your home the credit is 30% of the cost, with out the $1,500 limit. In addition any unused credit from these items can be carried forward to offset tax in the next tax year.
As always the tax law is complex and you should consult your tax advisor concerning your particular situation, to see if you qualify for the credits. Also you may do some planning to make some needed replacements during 2010 such as the furnace, or windows, or front door, and save 30% of the cost. The credit does also include improvements to trailer homes, and motor homes, if they are your principal residence.