Individuals are allowed a non-refundable personal credit for improvements to their principal residence that meet certain energy efficiency standards.
For 2011, the credit is equal to the sum of:
- 10% of amounts paid or incurred for qualified energy efficiency improvements plus
- Any residential energy property costs paid or incurred in 2011.
The credit for 2011 is limited to a total combined credit limit of $500 for all tax years after 2005 and a combined credit limit of $200 for windows for all tax years after 2005.
Qualified residential energy efficiency improvements and energy property costs include:
- Heating, ventilating, air conditioning (HVAC), advanced main air circulating fans used in natural gas, propane, or oil furnaces.
- Roofs (metal & asphalt)
- Electric pump water heaters, heat pumps, and oil water heaters
- Windows, skylights and doors
- Biomass stoves
Note: new construction and rentals do not qualify.
Examples of Limitations on Credit:
Example 1. Taxpayer X claimed non-business energy property credits of $200 for 2007 and $500 for 2009. X can’t claim any non-business energy property credit for 2011, because his $500 limit has been exhausted.
Example 2. Taxpayer Y claimed a $150 non-business energy property credit for a qualified natural gas furnace in 2006. Y claimed no other non-business energy property credit for any pre-2011 year. For 2011, Y can claim a non-business energy property credit of up to $350 ($500 − $150), up to $200 of which can be for windows.
Example 3. Taxpayer Z claimed a $200 non-business energy property credit for energy-efficient windows in 2006 and a $50 credit for an advanced main air circulating fan in 2007. Z claimed no other non-business energy property credit for any pre-2011 year. For 2011, Z can claim a non-business energy property credit of up to $250 ($500 − $250). However, none of Z’s 2011 credit can be for windows, because her $200 limit for windows has been exhausted.
As in effect for tax years beginning before 2012, the non-refundable personal credits can offset alternative minimum tax (AMT) as well as regular tax. The non-business energy property credit isn’t phased out for higher-income taxpayers.
For property placed in service after Dec. 31, 2011, the non-business energy property credit will not be available.
Also available for 2011 (and beyond), taxpayers are entitled to a 30% credit available with no upper limit expiring December 31, 2016 for expenditures related to: 1) Geothermal heat pumps 2) small wind turbines (residential) 3) solar energy systems.
Please feel free to contact us if you are interested in learning more about the residential energy tax credits and how they might be applicable to your tax situation.