Individual taxpayers are allowed a personal income tax credit, known as the nonbusiness energy property credit, equal to 30% of the sum of: (1) the amount paid or incurred during 2009 or 2010 for qualified energy efficiency improvements (i.e., building envelope components meeting certain requirements, and (2) the amount of residential energy property expenditures paid or incurred during 2009 or 2010.
No credit is allowed for any expenditure to the extent that an excluded energy conservation subsidy was provided for that expenditure. An excluded subsidy is one that a public utility provides to a customer to buy or install an energy conservation measure.
To qualify for the credit, the component or property must be installed in or on a dwelling unit located in the U.S. The term “dwelling unit” includes a manufactured home that conforms to the Federal Manufactured Home Construction and Safety Standards, 24 CFR, Part 3280. In addition, the dwelling unit must be owned and used as your principal residence. This requirement must be met at the time of installation. Thus, the credit is available only for existing homes.
The credit is not available for a rented home, because you have to own the home to claim the credit. Moreover, the credit is not available for your second home or vacation home.
The aggregate amount of nonbusiness energy property credits is limited to a total credit of $1,500 (thus, if you qualify for the 30% credit, the benefit is generated only for the first $5,000 of qualifying expenditures).
You can claim $1,500 of aggregate credits in 2009 and 2010 even if you already used up your $500 lifetime limit in 2006 and 2007. However, you do not get extra credits in 2009 and 2010 if you did not use up the $500 lifetime limit in 2006 and 2007.
Perhaps the biggest benefit of the energy credit is that for 2009 it can be used to offset the alternative minimum tax (AMT) as well as regular tax. This valuable benefit is available only for 2009 and will not be available for 2010. For tax years beginning after 2009, the energy credit (which is part of a broader category of nonrefundable personal credits) can be used to offset only your regular tax; it will not be available to offset the “dreaded” AMT. Thus, you should try to generate the credit this year in the event you are in AMT next year (and thus the credit cannot be used).
Below is a summary of the complicated energy credit rules.
