5 green energy projects with buyer appeal

Real Estate Tax Talk

In this difficult real estate market, one way homeowners can make their property more attractive to potential buyers is to install energy-saving equipment such as solar panels and solar water heaters.

This can not only increase the value of a home, it can also result in a tax credit for the homeowner. A tax credit results in a dollar-for-dollar reduction in your taxes — for example, a $1,000 tax credit reduces the amount of taxes you pay by $1,000. Moreover, you may claim tax credits regardless of whether you itemize deductions on IRS Schedule A.

The residential energy tax credit helps individual taxpayers pay for residential alternative energy equipment. You can get the credit for installing such equipment in your primary residence or second home, and for new construction. This credit is for residential property only, not rentals. It is scheduled to be phased out at the end of 2016, so you have some time to act.

This credit is substantial: 30 percent of the cost of the alternative energy property. There is no cap on the amount of credit available, except for fuel cell property. Generally, you may include labor costs when figuring the credit and you can carry forward to future years any unused portions of this credit.

Thus, for example, if you pay $50,000 to install solar panels in your home, you can get a credit of $15,000.

Not all energy-efficient improvements qualify. You can get the credit only for:

  • geothermal heat pumps that meet the requirements of the Energy Star program.
  • small residential wind turbines (these must have a nameplate capacity of no more than 100 kilowatts).
  • solar water heaters (at least half of the energy generated must come from the sun; this credit is not available for swimming pools or hot tubs — the water must be used in the dwelling).
  • solar panels (such photovoltaic systems must provide electricity for the residence and meet applicable fire and electrical code requirements).
  • fuel cells (residential fuel cell and microturbine systems with an efficiency of at least 30 percent).

Be sure you have the manufacturer’s tax credit certification statement, which can usually be found on the manufacturer’s website or with the product packaging. If you’re eligible, you can claim this credit on Form 5695, Residential Energy Credits when you file your federal income tax return. For all the details, see IRS Notice 2009-41, which you can download from www.irs.gov.


Contact Stephen Fishman:
Email Email Letter to the Editor Letter to the Editor