Check out expanded energy tax breaks

By David Compton / guest columnist

July 05, 2009 12:40 am

— Now there's an added incentive to generate energy savings at home and at work. Reason: The new economic stimulus law — the American Recovery and Reinvestment Act of 2009 — expands the tax breaks available for qualified improvements made by individual and business taxpayers. Let's review the key changes.
Energy tax breaks at home. For starters, the new law increases the residential energy credit from 10% of qualified expenses to 30%. As under prior law, the credit covers a wide variety of expenses ranging from central air conditioning to hot water boilers to insulation. Furthermore, the lifetime dollar cap of $500 for the credit is replaced with a cap of $1,500 covering 2009 and 2010.
The new law also removes through 2016 other annual credit caps for solar hot water heaters, geothermal heat pumps, and small wind energy property installed in a home. But a $500 cap remains for qualified fuel cell property.
Energy tax breaks at work. Business taxpayers can now benefit from modified tax incentives.
• A business may claim a 30% investment credit for electricity produced from renewable sources.
• The new law enhances the business energy credit by eliminating the cap on small wind property. It also repeals the basis reduction requirement for subsidized energy financing.
• Instead of taking a production credit payable over ten years, business taxpayers can elect to treat certain alternative energy facilities as energy property eligible for the investment credit. This election may be made for qualified property placed in service after 2008 and before 2014 (2013 for wind property).

David Compton is a Certified Public Accountant with offices in Meridian and Birmingham, Ala.