Few credits have been more confusing than the on-again, off-again credits rewarding taxpayers for energy efficient improvements to their residences: the nonbusiness energy property credit and the residential energy efficient property credit.
The nonbusiness energy property credit expired after 12/31/11. For property placed in service in 2011 there are new limitations. The credit now has a lifetime limit of $500, of which only $200 may be used for windows. Subject to the lifetime limits, only 10% of qualified energy efficiency improvements is allowed and the residential energy property costs are limited to $300 for energy efficient building property, $150 for any qualified natural gas, propane, or oil furnace or hot water boiler, and $50 for any advanced main air circulating fan. Also new, include any labor costs properly allocable to the onsite preparation, assembly, or original installation of the energy property.
The residential energy efficient property credit is scheduled to expire after December 31, 2016. Both credits are claimed on Form 5695, Residential Energy Credits. This is the credit of 30% of your costs of qualified solar electric property, solar water heating property, small wind energy property, geothermal heat pump property, and fuel cell property. Include any labor costs properly allocable to the onsite preparation, assembly, or original installation of the residential energy efficient property and for piping or wiring to interconnect such property to the home. This credit remains relatively unchanged from last year.