residential energy tax credit

[sdtaxman]

Have a client that is in the process of building a new home and paid for insulation, windows and doors in 2007 however they have not sold their old house until 2008 and were not in the new house so do they still qualify for the tax credit on these purchases. The biggest concern is because the credit is not available for 2008.

[Bucky]

New construction does not count toward the credit. Only improvements.

[BOB W]

New construction does not count toward the credit. Only improvements.

The builder gets the credit if he get a certificate.

[Bucky]

I think the credits available to the builder are different depending on percentage of energy savings and other factors. I don't think that was the concern of the poster.

[erchess]

Look it up

Tab 11-11 of TTB 1040 Edition says to me that the residential energy credits may be claimed only for the year qualifying property is placed in service so OP's client may not take the credit. I only skimmed and besides that I am tired, but I didn't find anything to indicate whether the credits can pertain to new construction.

[xgflek]

New construction counts, but only when use begins.

From the instructions to 5695:

Who Can Take the Credits
You may be able to take these credits if you made
energy saving improvements to your home located in
the United States in 2007. For credit purposes, costs
are treated as being paid when the original installation
of the item is completed, or in the case of costs
connected with the construction or reconstruction of
your home, when your original use of the constructed
or reconstructed home begins. If less than 80% of the
use of an item is for nonbusiness purposes, only that
portion of the costs that are allocable to the
nonbusiness use can be used to determine the credit.

So the new construction will count, but these particular clients will be out of luck, unless the credit gets renewed sometime for 2008.

[Bucky]

from energy star web site

I am building my own home, can I qualify for any of the tax credits?


Answer
The only tax credits for homeowners building their own homes are for photovoltaics, solar water heating, and fuel cells ("residential energy efficiency property" in Section 25D). To qualify for the fuel cell credit, the new home you are building must be planned as your principle residence. The credit for photovoltaic and solar water heating property does not have to be for your principal residence; so, rental units, second homes, etc... are all eligible. See the Instructions attached to 2007 IRS Form 5695 to help you further with this provision.



The tax credit for new windows, doors, insulation, roofs, HVAC and non-solar water heating (“eligible building envelope components” and “qualified energy property” (Section 25C)) are ONLY available for existing homes.



There is a $2,000 tax credit for building a new energy efficient home, but it is ONLY available to "eligible contractors"; therefore, owner/builders may not receive the builder tax credit unless employed as eligible contractors. Home builders who qualify as eligible contractors are eligible for the $2,000 tax credit for a new energy efficient home that achieves 50% energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements. At least 1/5 of the energy savings must come from building envelope improvements. There is also a $1,000 tax credit to the builder of a new manufactured home achieving 30% energy savings for heating and cooling over the 2004 IECC and supplements (at least 1/3 of the savings must come from building envelope improvements), or a manufactured home meeting the requirements established by EPA under the ENERGY STAR program.