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Tax Energy Credit: 2009-2010 - American Recovery and Reinvestment Act of 2009

Author: Better Business Bureau
Published:

Energy Provisions of the American Recovery and Reinvestment Act of 2009 from the Internal Revenue Service (FS-2009-10, April 2009) (Clarified statutory language in Section 1142, 5/13/09) You may also wish to visit the Internal Revenue Service Website at: www.irs.gov and search for American Recovery and Reinvestment Act of 2009. Another website offering information on tax energy credits is www.achri.net. On this site you can enter the model number of your equipment to determine if it qualifies for a Federal Energy Efficiency Tax Credit. The American Recovery and Reinvestment Act of 2009 (ARRA) provides energy incentives for both individuals and businesses. Here are some of the key energy provisions in ARRA that may impact taxpayers: Residential Energy Property Credit (Section 1121): The new law increases the energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. A similar credit was available for 2007, but was not available in 2008. Homeowners should be aware that the standards in the new law are higher than the standards for the credit that was available in 2007 for products that qualify as “energy efficient” for purposes of this tax credit. The IRS has issued guidance that will allow manufacturers to certify that their products meet these new standards. Until the guidance is released, homeowners generally may continue to rely on manufacturers’ certifications that were provided under the old guidance. For exterior windows and skylights, homeowners may continue to rely on Energy Star labels in determining whether property purchased before June 1, 2009, qualifies for the credit. Manufacturers should not continue to provide certifications for property that fails to meet the new standards. (According to energystar.gov, to claim the tax credit for energy efficient products placed in service in 2009, you will need to file the 2009 IRS Form 5695 and submit it with your 2009 taxes. Also, save your receipts and the Manufacturer's Certification Statement for your records. A Manufacturer's Certification Statement is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Please visit energystar.gov and choose "Tax Credits for Energy Efficiency" for more information.) Residential Energy Efficient Property Credit (Section 1122): This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property. See Notice 09-41.