Monday, April 20, 2009


Now that the tax season is over I have had a chance to review the items in the American Recovery and Reinvestment Act of 2009, signed into law by BO on February 17th, that will affect 2009 and 2010 Form 1040s (and 1040As). I will discuss these items over the next few days.

This past tax season several clients included notes or receipts for energy saving purchases made in 2008 with their tax “stuff”, hoping to get an energy tax credit. Unfortunately the credit for energy saving items purchased for your personal residence expired on December 31, 2007, and was not renewed until January 1, 2009. There was no such energy credit available for 2008 purchases. I expect that several of these clients were upset when I pointed out their bad timing.

The reinstated credit, a provision of ARARA 2009, allows for a maximum total energy credit of $1,500 for 2009 and 2010. If you use the full $1,500 credit on your 2009 Form 1040 you cannot claim an additional credit for qualifying purchases made in 2010 – but if you have a $700 credit on your 2009 return you can still claim up to $800 on your 2010 return, assuming you make qualified purchases in 2010.

The limits that had been placed on specific individual items - such $200 for windows, $50 for an advanced main air circulating fan, $150 for a qualified natural gas, propane, or oil furnace or hot water boiler, and $300 for “energy-efficient building property” - were also eliminated. The new credit is now 30% (up from 10%) of the cost of the item – up to the $1,500 maximum.

If you claimed the energy credit in 2006 or 2007 and used up part or all of the $500 credit maximum that was previously allowed you do not have to worry. The earlier $500 cap does not apply towards the $1,500 for 2009 and 2010 – you start from “0” with a clean slate in 2009.

The following items, which meet federal energy-efficiency standards, qualify for the credit:

· Energy-efficient windows
· Skylights
· Central air conditioners
· Electric heat pumps
· Water heaters
· Exterior doors
· Insulation
· Natural gas, propane or oil furnaces
· Natural gas, propane or oil hot water boilers
· Biomass fuel stoves
· Main air circulating fans
· Pigmented metal roofs

Just as with the previous credit, you should receive a “manufacturer’s certification” when you purchase an item that qualified for the energy credit. Save this certification and give it to your tax professional with your “stuff” next year. And to repeat, only qualifying items purchased for use in your primary personal residence are eligible for the credit.

Click here for more detailed information on the items available for the revised reinstated energy tax credit.



Anonymous said...

Does the credit phase out for higher incomes?

Robert D Flach said...


The residential energy credits discussed in this post are available to ALL taxpayers regardless of income.

This is one of the few tax benefits passed in recent history that does NOT "phase-out" based on AGI or MAGI.

The purpose of the credit is to encourage the purchase and use of energy-efficient products by those in all levels of income.