Certified Public Accountants

Highlights of the 2010 Tax Act

Energy Credit



The nonbusiness residential energy property tax credit for certain energy-efficient property installed in a principal residence located in the U.S is extended through December 31, 2011, but the credit is generally limited to $500 and must be reduced for similar credits for prior years.


The nonbusiness energy property credit is equal to the sum of: (1) 10% of the amount paid or incurred for qualified energy efficiency improvements installed during the tax year, and (2) the amount of the residential energy property expenditures paid or incurred during the tax year.


Qualified energy efficiency improvements include exterior windows, skylights, exterior doors, insulation, certain metal roofs and certain asphalt roofs, which meet the Energy Star program requirements.


Residential energy property expenditures include the cost and installation for energy-efficient building property, qualified natural gas, propane, or oil furnace or hot water boiler, or an advanced main air circulating fan.


Dollar limits on residential energy property expenditures.

The credit allowed for residential energy property is not as generous as past credits and can't exceed:

· $50 for each advanced main air circulating fan;

· $150 for each qualified natural gas, propane, or oil furnace or hot water boiler; and

· $300 for each item of energy-efficient building property.


Under the 2010 Tax Relief Act, the maximum nonbusiness energy property credit for all tax years is $500, of which no more than $200 may be for expenditures on windows.


To apply the $500 (and $200) lifetime limit, a taxpayer must look back to all tax years for which the nonbusiness energy property credit was in effect. Those years include 2006 and 2007, when the credit was subject to a $500 lifetime limit, and 2009 and 2010, when there was a $1,500 aggregate limit.


If the total of nonbusiness energy property credits for all earlier years is $500 or more, the taxpayer can't claim a credit for 2011. If the total is less than $500, the taxpayer can claim up to $500 minus the total credits claimed in earlier years.

For 2010 tax returns, the overall limit remains at $1,500.



















Highlights of the Tax Relief, Unemployment Insurance

 and Job Creation Act of 2010 (Continued)

Date: 12/28/2010