The rules regarding residential energy credits are continuously changing. Homeowners who make improvements in one year may not be eligible for the tax credit, whereas they may have been entitled to the credit in either the preceding or following tax year. The American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act) provides benefits to homeowners by extending the Credit for Non-business Energy Property (CNEP) for 2012 and 2013.
The CNEP can be taken when qualified energy efficient improvements or expenditures are made to a taxpayer’s principal residence, including new insulation; replacement windows, skylights and doors; central air conditioners; certain water heaters, furnaces or boilers; and a new metal or asphalt roof specifically treated to reduce heat loss. The CNEP is available for eligible property placed in service after December 31, 2011, and before January 1, 2014. In order to qualify for the CNEP, there must be a reasonable expectation that the qualified energy efficiency improvements will remain in use for at least five years.
For 2012 and 2013, the CNEP is equal to ten percent of qualified energy efficiency improvements installed plus qualified residential energy property expenditures. The maximum CNEP is equal to $500 after reduction for CNEP credits previously allowed after 2005. In other words, Congress is giving the taxpayer a tax credit for being energy efficient, but reduces the credit for energy efficient expenditures taken in prior years.
The CNEP should not be confused with the Residential Energy Efficient Property (REEP) credit, which is available through 2016. Both are energy credits available to homeowners; however, the REEP credit involves expenditures for solar electric property; solar water heating property; fuel cell power plants; small wind energy property; and geothermal heat pump property.
If you have installed energy-saving improvements to your home in 2012 or plan to do so in 2013, you may be eligible for an energy tax credit.
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