The Appletree Core Newsletter – Accounting, Payroll, and Tax CPA in Londonderry, NH

The American Recovery and Reinvestment Act provides several tax incentives for individuals that will affect the preparation of their 2009 tax return. Although much of these incentives were around in 2007, things took a hiatus in 2008, and now they come back in 2009 as a whole new animal!

First, we have the Residential Energy Property Credit. This non-refundable credit allows you to take a direct tax credit on your tax return for 30 percent of qualifying improvements in 2009 and 2010 totaling $5000 for a maximum credit of $1500 (BOTH years combined). Qualifying products include:

1. Energy-efficient exterior windows, doors and skylights
2. Energy-efficient heating and air conditioning systems
3. Insulation
4. Water Heaters (natural gas, propane, or oil)
5. Roofs (metal and asphalt)
6. Biomass stoves

The standards used for what qualifies as ‘energy efficient’ have been toughened up from prior years. A manufacturer’s certification should be obtained and kept as ‘proof’, just like you would a receipt.  The IRS has issued Notice 2009-53 that allows manufacturers to certify their products to meet these new standards. You must make sure that the certification statement is for the 2009 credit, and not the old 2005 credit. So watch out for purchases of a clearance item or an item at an overstock store.  To make things even more confusing, taxpayers will no longer be able to rely on the Energy Star Label.

Next, we have the Residential Energy Efficient Property Credit. This non-refundable credit allows you to take a direct tax credit on your tax return for 30 percent of qualifying improvements with NO maximum amount. This covers qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.

A manufacturer’s certification should also be obtained and kept as ‘proof’.  The IRS has issued Notice 2009-41 that allows manufacturers to certify their products to meet these new standards.

Regardless of whether an expense is being used for one credit or the other, the home buyer must reasonably allocate the cost of the improvements allowed versus those expenses for the alternative energy equipment. The costs may include a reasonable allocation of the home builder’s construction mark-up. The home builder should provide the information necessary to make this allocation, as well as provide any necessary manufacturer certifications.

If you’re not sure if you can take a deduction for energy improvements, ask me…I’ll give you my take…

Steven A. Feinberg – www.AppletreeBusiness.com – Get Appletree Blog via Email!