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HORNE Tax Alert

Energy Efficient Tax Credits

If widely fluctuating energy costs and environmental concerns have you looking for ways to go green, here are some tips on how going green can cut energy costs and reap tax saving energy credits. Better yet all of these tax credits are available against Alternative Minimum Tax (AMT) this year and none of them are subject to any annoying phase out limits.

Making Energy Efficient Improvements to Your Home

A great way to cut energy costs and save up to $1,500 in federal income taxes is to make certain energy efficiency improvements to your home. You just need to be sure to pick the right product.

The credit (which is called the non-business energy property credit) you're entitled to equals 30% of what you pay for (a) qualified energy efficiency improvements (such as, certain energy efficient insulation, windows, doors and roofs), and (b) qualified residential energy property (such as, certain energy efficient heat pumps, hot water heaters or boilers, and advanced main air circulating fans) on your principal residence (no vacation homes). However, there is a $1,500 cap on aggregate credits claimed in 2009 and 2010 for all types of eligible expenditures. If there is any possibility you'll be subject to AMT next year, you may want to make these improvements before the year-end since this credit can be used to offset AMT in 2009, but absent Congressional extension, it won't be in 2010.

Using the Solar, Wind, Geothermal or Fuel Cell Energy to Power Your Home

Although the costs of qualifying expenditures tend to be pretty steep, if you install solar, wind, geothermal, or fuel cell energy saving equipment in 2009, you may be able to take advantage of the residential energy efficient property (REEP) credit. The REEP credit equals 30% of expenditures to install: (1) qualified solar water heating equipment, (2) qualified small wind energy equipment, (3) qualified geothermal heat pumps, (4) qualified solar electricity generation equipment, and (5) qualified fuel cell equipment (up to $1,000 per kilowatt hour). The credit only applies to equipment you place in service in your U.S. residence, and it cannot be claimed for equipment used to heat a swimming pool or hot tub. The credit for fuel cell equipment is only available for your principal residence; however, the two solar credits apply to any residence (including vacation homes).

A good place to start your search for products that qualify for these credits is at www.energystar.gov/taxcredits where you'll find a table listing requirements for various products. Then, to ensure the product satisfies the required energy saving conditions for the credit, be sure to check the product package materials or manufacturer website before making the purchase. According to the IRS, you can rely on the manufacturer s written certification statement, which is typically included with the product package materials or on the manufacturer's website. You just need to keep a copy of this certification as part of your tax records.

There are some pretty nice tax savings to be had from making certain energy saving and environmentally friendly expenditures in 2009.

HORNE's tax team is ready to help you with energy efficient tax credits. For more information, please contact your HORNE advisor or local HORNE office.