The American Recovery and Reinvestment Act's energy provisions for individuals.

• Author: Gibson, Dan

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, P.L. 111-5 (ARRA), which provides energy incentives for individuals. Unlike many of the ARRA provisions, the energy incentives are available to all individual taxpayers and do not phase out based on adjusted gross income. Here are some of the key energy provisions in ARRA that affect individuals.

Residential Energy Property Credit (Sec. 25C)

The new law increases the energy tax credit for homeowners who make energy-efficient improvements to their existing homes. It increases the credit rate from 10% to 30% of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010.

The credit applies to improvements such as additional insulation, energy-efficient exterior windows, and energy-efficient heating and air conditioning systems.

A similar credit was available for 2007 but was not available in 2008. Individuals should be aware that the standards in ARRA's version of the credit are higher than the standards for the 2007 credit for products to qualify as energy efficient for purposes of the credit. The IRS will issue guidance that will allow manufacturers to certify that their products meet these new standards. If the previous $500 lifetime maximum has already been used by an individual for qualifying expenditures in 2006 and/or 2007, that person can now incur additional qualifying property costs in 2009 and/or 2010 and be eligible for a residential energy property credit of up to $1,500 over both years.

The IRS has released interim guidance providing procedures for manufacturers to follow to certify property as either eligible building envelope components or qualified energy property (Notice 2009-53). The notice also tells taxpayers who are claiming the Sec. 25C credit when they can rely on a manufacturer's certification.

For exterior windows and skylights, homeowners may continue to rely on Energy Star labels in determining whether property purchased before June 1, 2009, qualifies for the credit. Manufacturers should not continue to provide certifications for property that fails to meet the new standards.

Residential Energy-Efficient Property Credit (Sec. 25D)

The nonrefundable residential energy-efficient property tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat...