Frequently Asked Questions:
Question #1 – If I don’t have to file income taxes, can I still get the energy efficiency tax credit?
Answer – According to the IRS the tax credit is technically “non-refundable” which means at the end of the year you cannot get back more from the Federal Government than you paid in.
Question #2 – Is there an upper limit on tax credits?
Answer – There is no upper or lower limit on income for the energy efficient tax credits
Question #3 – Are the energy efficient tax credits limited by the Alternative Minimum Tax (AMT)?
Answer – For 2009 the energy efficient tax credits are NOT limited by the AMT. “Section 25 D” products (which include geothermal, solar, and wind, at 30% with no upper limit) are NOT limited by the AMT at all. “Section 25C” products (which include insulation, windows, doors, roofs, HVAC, and non-solar water heaters, at 30% up to $1,500) are NOT limited by the AMT in 2009, but are currently limited by the AMT in 2010, unless Congress amends the law.
Question #4 – Can the energy efficiency tax credit be carried over to future years?
Answer – The tax credit for products at 30% up to $1,500 CAN NOT be carried over to future years. You can’t even carry forward tax credit dollars from 2009 to 2010. But you can take part of the $1,500 in 2009, and the rest in 2010 – if they are for separate purchases (ex: you spend $3,000 on windows in 2009 and get a $900 tax credit on your 2009 taxes, then spend $2000 on an air conditioner in 2010 and get a $600 tax credit on your 2010 taxes).
The tax credit for the following products at 30% with no upper limit CAN be carried forward to future years:
• Geothermal Heat Pumps
• Solar Panels
• Solar Water Heater
• Small Wind Energy Systems
• Fuel Cells
You can carry forward the credit as long as the credit is still in effect. In this case, the credit is in effect through 2016. The energy efficiency tax credit is technically “non-refundable” which means at the end of the year, you can’t get back more in credits than you paid to the government in taxes throughout the year. If you are unable to claim the entire 30% of your purchase for the above products, you can carry forward the unclaimed portion to future years through 2016.
The tax credit for insulation, windows, doors, roofs, HVAC, biomass stoves, and non-solar water heaters CAN NOT be carried over. These credits are for 30% of the cost, up to $1,500 in 2009 and 2010
Question #5 – What is the maximum tax credit I can get for the energy efficient home improvements?
Answer – Many of the energy efficiency tax credits are limited to $1,500 combined total for 2009 and 2010. The $1,500 maximum tax credit covers insulation, windows & doors, roofs, HVAC, biomass stoves, and non-solar water heaters.
Improvements not affected by the $1,500 cap (and in effect through 2016) include:
- Geothermal heat pumps
- Solar water heater
- solar energy systems
- small wind energy systems
- fuel cells (up to $500 per .5 kW of power capacity)
You can get both the 30% tax credit (up to $1,500) and the 30% tax credit (with no upper limit). For example, you could replace your windows and get $1,500, and purchase a new geothermal heat pump and get an additional 30% tax credit (with no upper limit). However, these are non-refundable tax credits, so you can’t get more back in tax credits than you pay in federal income tax. The tax credits that are not limited to the $1,500 cap can be carried forward to future years.
Even if you received the full $500 for the tax credits back in 2006 or 2007, you are still eligible for the full $1,500 in 2009 and 2010
Question #6 – What parts of a geothermal heat pump are covered by the tax credit?
Answer – The majority of the geothermal heat pump property and it’s installation is covered by the 30% tax credit. All geothermal heat pump components certified by the manufacturer in the “Manufacturer Certification Statement” will be covered. There may be some add on components that will not be covered such as an emergency back-up system and the ducts. These components are not directly related to the efficiency of the covered geothermal heat pump property
Question #7 – How can I determine if I can collect the tax credit? Does it matter if I am getting a tax refund?
Answer – Whether or not you are getting a refund does not matter. What matters is your “tax liability” – which is the total amount of federal income tax you are responsible for paying.
These energy efficiency tax credits are technically “non-refundable” which means you can’t get more money back in tax credits than you pay in federal income taxes (your tax liability). Check your last year’s tax return to get a sense of your tax liability (line 61 on the 2008 1040 form, called “total tax”). You can claim all of your tax credits as long as your tax liability, is greater than zero after all tax credits have been applied.
For example, say your Adjusted Gross Income (AGI) is $50,000, your tax liability is $10,000 (before you apply tax credits), and you’ve had $12,000 withheld from your paychecks. In this scenario you could claim up to $10,000 in tax credits. If you are eligible for the entire $1,500 tax credit, then your tax liability ($10,000) would be reduced to $8,500. Since you already had $12,000 withheld, you will get a tax refund of $3,500 ($12,000 – 8,5000 = $3,500).
If your AGI was $50,000, your tax liability $10,000 (before tax credits were applied), and you had $8,000 withheld from your pay checks, you would still have the ability to claim up to $10,000 in tax credits. If you are eligible for the entire $1,500 tax credit, your tax liability ($10,000) would be reduced to $8,500 and you would owe the government $500 at the end of the year ($8,000 already paid in taxes – $8,500 tax liability = $500 final payment).
