Residential Energy Efficient Property Credit – Solar Energy Credit

This nonrefundable energy tax credit may help you pay for qualified residential alternative energy equipment, such as geothermal heat pumps, solar hot water heaters, and wind turbines.

The credit was expanded by

The American Recovery and Reinvestment Act in early 2009. A few of the previously imposed maximum amounts were eliminated and it now provides for a credit equal to 30% of the cost of qualified property.

The credit is usually equal to 30% of the cost of the equipment and may include the cost of the labor used to install it. For 2009, there is generally no cap on this credit and it's available for equipment placed into service through 201
6. Regrettably, it's a nonrefundable credit, which is an important, because in this case, your credit is limited to your tax liability. Credit basics

The credit is available for property placed in service prior to January 1, 2017 and the credit is generally is equal to 30% of certain of solar electricity equipment, solar water heaters, fuel cell plants, qualified small wind energy property and qualified geothermal heat pump(eligible equipment). Qualifying property 30% of the following qualifying expenditures can qualify for the credit:o Qualified solar electric property costs for expenses incurred for property that uses solar energy to produce electricity for use in your home.

These costs may be used to purchase a solar panel or other property that may be installed on a roof.

These costs do not have to be incurred for your main home. o Qualified solar water heating property costs- Solar panels is a good example of this type of cost as long as it is used to produce heat water for use in a dwelling located in the United States.

It must be used in a residence

The home does not have to be the taxpayer's main home and at least half of the energy must come from the sun. o Qualified small wind energy property costs pertain to expenses incurred for property that uses a wind turbine to generate electricity for use in the taxpayer's home. For this type of expenditure, the home does not have to be the taxpayer's main home. o Qualified geothermal heat pump property that uses the ground or groundwater as a thermal energy source to heat or cool your home and is installed on or for a taxpayer's home.

It's a special type of heat pump.

The home does not have to be the taxpayer's main home. o A qualified fuel cell power plant that is an integrated system comprised of a fuel cell stack assembly and associate components that converts fuel into electricity.

The fuel cell must be installed into the taxpayer's main home. Labor costs resulting from on-site preparation, assembly, or original installation of the residential energy efficient property and piping or wiring that connects the eligible property to the home may also qualify for the credit. Basic credit limits

The $500 limitation on qualified fuel cell property is the only credit limitation.

There is no limit to the 30% credit based upon the eligible equipment. Since this credit existed in the past.

It is important that you verify that the certification statement is for the 2009 credit rather than a credit for an earlier year. A word of advice, since certain slow-moving energy-efficient products from last year may remain unsold, the equipment may be aggressively marketed at closeout prices.

Therefore, it's important that you received a 2009 certification from the manufacturer. This is required to use the credit on your 2009 tax return.

The amount of the residential alternative energy credit that can be claimed cannot exceed your regular income tax liability(reduced by the foreign tax credit,if any) and the alternative minimum tax, over the sum of certain nonrefundable credits.

In 2010 the limitation changes and reference should be made to the applicable IRS regulations. For jointly owned property special pro ration rules need to be applied.

In order to obtain the credit, you must complete Form 569
5. Before completing Form 5695,you need to calculate any credit for the elderly or the disabled,or other motor vehicle related credits.

The credit is limited to your tax liability and the credit cannot be utilized if you have no tax liability.

Also, the credit is not available if you file a 1040EZ and 1040A. To use this credit you will now will have to file a regular Form 1040.

It is also important to determine the eligible credit carry forward. This is a complex calculation and for more information please refer to IRS Notice 2009-41. Tax laws are complex, change constantly and each situation is unique. This article is not intended to provide legal or accounting advice. Because the tax laws are complex, change constantly and each situation is unique, the reader is advised to do his or her own due diligence and consult with professionals in these areas.
Why not learn more about how we can help you determine if you are eligible for the alternative energy equipment credit and other 2009 tax credits and about our competitively priced internet and paperless based approach to tax preparation at affordable prices. Sandor(Sandy) E. Lenner,C. P. A. -M. B. A. has been providing accounting and business services for over 35 years and works part-time at his wife's CPA firm .

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