The residential energy has been available to taxpayers for 2009 and 2010. It is scheduled to terminate on December 31, 2010.
Congress may decide to extend it for additional years, but in this period of uncertain economic times, there is no guarantee it will be available after Dec. 31.
The Non-business Energy Property Credit is available if you install qualifying energy efficient items in your primary residence. It is not available for new construction or rental properties. There is a separate Residential Energy Efficient Property Credit that provides for solar credits.
Energy efficient replacement windows, insulation, hot water heaters, air conditioning and heating systems are among the products that may qualify you for the credit. The credit available is a maximum of $1,500 for all installations combined in years 2009 and 2010 (i.e. – not $1,500 each year).
The credit is figured using form 5695, which also contains the instructions on how to qualify for the credit and complete the form. Go to the IRS site and print out the form, including instructions.
Tax Hint: This is NOT a refundable credit. Qualifying for the full $1,500 credit does not necessarily mean you will receive all or even any part of it as a refund. I have prepared numerous returns for individuals who qualified for the full credit and then determined that the taxpayer had no tax liability against which it could be deducted. You must have a tax liability to get any benefit from this credit – it is not a refundable credit.
There are times you absolutely need to replace items and an energy credit is not your purchase motivator. However, before you get talked into making an energy efficient purchase based on the enticement of the energy credit, do the numbers to be certain you will actually receive a benefit – not just an unusable credit.