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Individuals that are contemplating making major energy related purchases for their homes may wish to consider looking into alternative fuel sourced property. Individuals are permitted a 30% personal income tax credit for the purchase of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. The Residential Energy Efficient Property Credit is also known as the REEP credit. All the expenditures must be for a home located in the U.S. and used as a dwelling unit by the taxpayer.
The “qualified” solar electric property expenditure is for property that uses solar energy to generate electricity for use in the dwelling unit.
The “qualified” solar water heating property expenditure is for property to heat water for use in the dwelling unit, if at least half of the energy used by the property for that purpose is derived from the sun. The solar water heating property must also be certified for performance by the non-profit Solar Rating Certification Corporation or a comparable entity endorsed by the government of the state in which the property is installed.
“Qualified” fuel cell property is an integrated system comprised of a fuel cell stack assembly and associated components that:
... converts a fuel into electricity using electrochemical means;
... has an electricity-only generation efficiency of greater than 30%; and
... generates at least 0.5 kilowatts (kw) of electricity; and is for use in the taxpayer’s
… principal residence.
The “qualified” small wind energy property expenditure is for property that uses a wind turbine to generate electricity for use in connection with the dwelling unit. For additional information on this credit see our article entitled: Small Wind Energy Program & Credits.
“Qualified” geothermal heat pump property is any equipment that:
... uses the ground or ground water as a thermal energy source to heat the dwelling unit or as a thermal energy sink to cool the dwelling unit, and
... meets the Energy Star program requirements in effect when the expenditure is made.
The following expenditures are also taken into account in determining the amount of the credit:
... labor costs properly allocable to the on-site preparation, assembly, or original installation of qualifying property, and
... piping or wiring to interconnect qualifying property to the dwelling unit.
Taxpayers may rely on a manufacturer's certification that property meets the requirements for claiming the residential energy efficient property (REEP) credit. The taxpayer need not attach the certification to the tax return on which the credit is claimed, but must maintain records that establish entitlement to the credit.
The REEP credit is a nonrefundable personal tax credit. This means that the taxpayers can offset their entire regular tax liability and, for 2009 only, their AMT tax liability by this nonrefundable tax credit.
Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the
Internal Revenue Code, or for promoting, marketing or recommending any transaction or matter addressed herein
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