Energy Credit & New House

[LawrenceGR]

I wonder if any of you have come across a new house with all the lastest energy improvements built into the house. Would this count for an energy credit? or must it be an add-on to a exsiting home? My first thought is, there is no improvement since the house is being built anyway.

[jainen]

You can take the credit

>>there is no improvement since the house is being built anyway<<

You can take the credit if you are building the house, but not if you buy one already completed. The key element is whether the taxpayer owned the property at the time the improvements were installed.

[LawrenceGR]

Thanks

for the help.

[Jesse]

Build or hire to build or prefab home

I'm confused on this issue.

If I buy the land and hire someone to build me a home am I eligible for the residential credits for the windows/doors, a/c, furnace, insulation(not the credits that the builder may be eligible for - but the $500 residential energy credit the homeowner is eligble for)?

If I buy the land and build the house myself am I eligible for the max $500 residential energy credits?

If I buy a prefabricated home windows/doors and insulation is already installed when house is delivered to site would the furnace and a/c installed after the house is delivered qualify for the residential energy credits?

[Jesse]

>>there is no improvement since the house is being built anyway<<

You can take the credit if you are building the house, but not if you buy one already completed. The key element is whether the taxpayer owned the property at the time the improvements were installed.

I'm still looking for guidance on this issue. Form 5695 instructions say that "you may be able to take these credits if you made energy saving improvements to your home located in the US in 2006". "Home. A home is one that you lived in during 2006 and includes a house, houseboat........."

I have a client that built a home in 2006 and I told him that he was not allowed the credits because it was not an existing home. Another preparer told him the credits are allowed which seems to be what Jainen is saying. Is there any information that clearly spells out these facts?

[jainen]

our little secret

>>Is there any information that clearly spells out these facts?<<

My information spelled it out for you, to wit, "You can take the credit if you are building the house, but not if you buy one already completed. The key element is whether the taxpayer owned the property at the time the improvements were installed. "

You can quote me if you wish, but you don't have to give me credit if you don't want to. It can be our little secret.

[Jesse]

Methinks that sometimes I think too much.

>>Is there any information that clearly spells out these facts?<<

My information spelled it out for you, to wit, "You can take the credit if you are building the house, but not if you buy one already completed. The key element is whether the taxpayer owned the property at the time the improvements were installed. "

You can quote me if you wish, but you don't have to give me credit if you don't want to. It can be our little secret.

To quote birdlegs: "Methinks that sometimes I think too much."

So do I have to physically build the house or can I take the credit if I hire a contractor to build my house?

[jainen]

>>do I have to physically build the house or can I take the credit if I hire a contractor<<

That's entirely up to you, my friend. (Or, if you are married, it's entirely up to your ever-lovin'.)

[Jesse]

>>do I have to physically build the house or can I take the credit if I hire a contractor<<

That's entirely up to you, my friend. (Or, if you are married, it's entirely up to your ever-lovin'.)

As long as it is up to me, I'll take the credit, my ever-lovin' will go along with it. Now let's say my ever-lovin and I get in an audit, will the IRS allow these credits or will we have to pay back the credit, penalties and interest?

[jainen]

>>in an audit, will the IRS allow these credits or will we have to pay back the credit, penalties and interest?<<

As to that, the only answer I can give you is this paragraph from my own engagement letter, which you would have to sign if you were my client.

"The tax code may support different interpretations and I will use my best judgment in treating the information you provide to me. As a normal part of our tax system, your return is subject to examination by the taxing authorities. No promises or guarantees of specific results in such an examination can be made. You are responsible for all taxes, penalties, and interest that might be assessed. In the event of an examination, I am available to represent you. The process is time-consuming and usually costs more than the original tax preparation."

[S T]

Thanks

Thanks Jainen for sharing that portion of your engagement letter. Great info!

Sandy

[Jesse]

I value your opinion and appreciate your help Janien, and even though you have given me permission to quote you I think your just having fun messin' w/ me. Even with the disclaimer as a practitioner you would want to make sure the position taken has merit.

Would you take the energy credit for your client that has hired a contractor to build a new home on their property? If your client was audited, besides your own authority how would you back up your client's position?

[jainen]

wording in the law

>>Would you take the energy credit for your client that has hired a contractor to build a new home on their property?<<

Yes.

>> If your client was audited, besides your own authority how would you back up your client's position?<

My entire defense would consist of the wording in the law.

[Jesse]

From the NATP website

Question:
Mr. and Mrs. Able built a new residence in 2006 that included energy-efficient windows, doors, furnace, air conditioning, and water heater. They have all of the required manufacturer's certifications and Energy Star ratings and would like you to calculate the amount of energy tax credit they will receive on their 2006 tax return. Do they qualify for the credit?

Answer:
No. While a manufacturer's certification states that a particular product or component qualifies for the energy tax credit, the product must be installed as an improvement to an existing residence. For example, the taxpayer has to take out the old windows and install new energy-efficient windows, or take out the old storm doors and install new energy-efficient storm doors. In other words, at the time of installation the house must already be owned and used as the taxpayer's principal residence. [For more information, see Notice 2006-26 at www.natptax.com, Federal Tax Information, IRS Notices.]

[Jesse]

Did anyone take the residential energy credit for yourself or any of your clients for a home that was self built or contractor hired to build and used as a primary residence in 2006?