The Tax Increase Prevention Act of 2014 retroactively renewed the Credit for Nonbusiness Energy Property (CNEP) effective January 1, 2014, expiring again on December 31, 2014.
As you may know, the CNEP can be taken when qualified energy efficient improvements or expenditures are made to your principal residence, including new insulation; replacement windows; skylights and doors; central air conditioners; certain water heaters, furnaces or boilers; and a new metal or asphalt roof specifically treated to reduce heat loss. The CNEP, which was not available for the 2008 tax year, is extended for eligible property placed in service after December 31, 2011 and before December 31, 2014. In order to qualify for the CNEP, there must be a reasonable expectation that the qualified energy efficiency improvements will remain in use for at least five years.
For 2014, the CNEP is equal to ten percent of qualified energy efficiency improvements installed plus qualified residential energy property expenditures. The maximum CNEP is equal to $500 after reduction by CNEP credits previously allowed after 2005.
The CNEP is often confused with the Residential Energy Efficient Property (REEP) credit. Both are energy credits available to homeowners; however, the REEP credit involves expenditures to solar electric property; solar water heating property; fuel cell power plants; small wind energy property; and geothermal heat pump property. This tax credit is 30% of the cost of alternative energy equipment that you installed on or in your home. Qualified equipment includes solar water heaters, solar electric equipment and wind turbines. If your REEP credit is more than the tax you owe, you can carry forward any unused portion of this credit to next year’s tax return. This REEP credit is available through 2016.
For an easy to follow chart of the tax credits available, please see the Energy Star website here.
Please do not hesitate to contact us should you have any questions regarding the residential energy credit.