Tuesday, November 30, 2010

Last Month for Tax Credit

As we near the end of 2010, HPBA has been receiving many questions regarding the 30% tax credit (capped at $1,500) for 75% efficient stoves. Most of these questions are regarding when the stove has to be installed in order to get the tax credit.

The appliance must be installed in 2010. The following details from the IRS Guidance for Nonbusiness Energy Property (page 6-7) shows that the appliance needs to be INSTALLED in 2010 in order to claim the credit which expires on December 31, 2010. http://www.irs.gov/pub/irs-drop/n-09-53.pdf

General Provisions. Under all three of the acts, EPACT, EIEA, and ARRTA, the following provisions apply:

(1) Requirements to Claim the Credit. A taxpayer may claim a credit under
§ 25C with respect to amounts paid or incurred for an item of property only if each of the following requirements is satisfied:

(a) The item is installed in or on a dwelling unit located in the United States and, at the time of installation, the dwelling unit is owned and used by the taxpayer as the taxpayer's principal residence (within the meaning of § 121). Thus, the credit is only available for existing homes. See § 45L for the credit applicable to new homes.

(b) The original use of the item commences with the taxpayer.

(c) In the case of a building envelope component described in section 2.03(1) or 4.01 of this notice, the component reasonably can be expected to remain in use for at least five years. For this purpose, a component will be treated as reasonably expected to remain in use for at least five years if the manufacturer offers, at no extra charge, at least a two-year warranty providing for repair or replacement of the component in the event of a defect in materials or workmanship. If the manufacturer does not offer such a warranty, all relevant facts and circumstances are taken into account in determining whether the component reasonably can be expected to remain in use for at least five years.

(2) Time of Expenditure. The credit is allowed for amounts paid or incurred by the taxpayer during the taxable year. Section 25C(e)(1) incorporates § 25D(e)(8), relating to the time expenditures are treated as made. Accordingly, except as provided in section 2.03(1)(e) and (f) of this notice, expenditures will be treated as made for purposes of § 25C when the original installation of the property is complete or, in the case of reconstruction, when the original use of the reconstructed property begins.