GREEN/ENERGY EFFICIENT BUILDING

Recent Congressional legislation has improved the tax credit for installation of residential heat pumps. With the new laws, a residential customer who installs a residential geothermal heat pump may be eligible for a tax credit of 30% of the installed cost of the system, no cap.

As part of the economic rescue bill (HR 1424) passed in October 2008, a residential system installed and placed in service anytime between January 1, 2008 and December 31, 2016 was eligible for a tax credit equal to 30% of the installed cost of the system up to a cap of $2,000 for a single residence.

The Stimulus Bill signed recently by President Obama improves that tax credit. Specifically, systems placed in service after January 1, 2009 are no longer subject to the caps. As a result, an installed system now is eligible for a 30% tax credit of the total installed cost of the system. In addition, if the taxpayer can’t use the credit in the year the system is installed, he or she can carry any unused credit into the next tax year.

Some key dates to keep in mind:

• If you installed a system and placed it “in service” anytime in 2008, you are entitled to a tax credit equal to 30% of the cost of the system subject to a cap of $2,000 for a single family.
• 2009 installations are not subject to the cap.

Other provisions of the residential credit remain the same:

• The system must meet Energy Star requirements in effect at the time the system is completed.

• The system must be in the taxpayer’s residence but is not limited to primary residence. Energy Star requires that your system meets specific efficiency standards and produce some or all of your domestic hot water heating.

• There are no specific requirements for the invoice. However, it will be helpful if the invoice states “Geothermal Heat Pump” and that it “Exceeds requirements of Energy Star program currently in effect” on it.

• The taxpayer has to file IRS Form 5695 to receive the credit.

There is a special rule for Condos:
In a typical condo, the owners contribute to the upkeep by paying money to a condominium management association. If the association puts in qualifying equipment, each member of the association can claim the residential tax credits on his or her taxes for his or her share of the spending. The condo has to be “substantially used as residences.”

Last, in most cases, a condo association is not a taxable entity. The individual unit holders would be the ones that can benefit from a tax credit.