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EPACT Energy Efficient Home Tax Credit Extended!

Energy Efficient Home Tax Credit

Are you a builder thinking of building an energy efficient home or are you already building efficient homes?  Are you a renovator looking to rehabilitate a home for energy efficiency?  If you answered yes to any of these questions you will want to read this blog.  The Federal Government has extended this tax credit (2005 EPACT Tax Credit for energy efficient homes) through 2013.  The credit is for $2,000 per energy efficient home and $1,000 for an energy efficient manufactured home.  Just to be clear, this blog is not intended to be tax advice and we recommend you consult with a tax professional prior to making any decisions with regard to this credit.

How does a home qualify?

A qualified new energy efficient home is a dwelling unit located in the United States, whose construction is substantially completed after August 8, 2005, and sold or leased to another person after 2005 but before 2014, for the use as a residence.  The home is also required to be certified and meet certain energy saving requirements.  Construction also includes substantial reconstruction and rehabilitation (IRS form 8908).  The home needs to be qualified by a RESNET Certified 3rd party rater.

What are the energy saving requirements?

The home must meet the 50% energy efficient standard to receive the $2,000 credit.  The home must be certified to have an annual level of heating and cooling energy consumption at least 50% below the annual level of a comparable dwelling unit and has building envelope component improvements that account for at least 1/5 of the 50% reduction in energy consumption.  For example, a qualifying component of the building envelope could be insulation and/or air sealing, but has to account for at least 1/5 of the 50% reduction.  A home that is certified to meet these requirements will be eligible for the credit.  Manufactured homes need to meet a 30% reduction with 1/3 of it coming from the building envelope to be eligible for the $1,000 credit.  I will discuss the process of certification later in the blog.

Who gets the credit?

The credit can be given to a new home builder or home renovator.  The determining factor is who owned the property during the construction.  An eligible contractor must own and have a basis in the qualified home during its construction to qualify.  For example, if the person that hires a 3rd party contractor to construct the home owns the home during construction, the person that hires the 3rd party contractor is the eligible contractor and the 3rd party is not.  The key factor is who owns the property during the construction.  The eligible contractor will be the one who would qualify for the credit.

What is the process to qualify the home?

As mentioned before, a RESNET Certified 3rd party rater must be hired to qualify the home and will perform a HERS Index Rating.  Ideally, this company should be brought in during the planning stage prior to breaking ground.  The rater will be able to model the home into RESNET approved software from building prints and specs.  Once the home is modeled, the rater can immediately tell if the home will qualify for the credit.  This way, if the home does not pass, recommendations can be made to help it qualify.  The next step in the process is for the rater to make a pre-drywall site visit during construction once the insulation is installed.  The rater will verify insulation levels and make sure everything else is consistent with the initial plans.  The last step will be a final site visit by the rater once the home is completely finished prior to submission of the occupancy permit.  At this stage the rater will be doing final verification as well as running some tests.  The rater will input the final numbers into the modeling software to determine if the home qualifies.   If it does, then the qualifying party will receive paperwork from the rater that states the home qualifies for the credit.

Can a home already built qualify for this credit?

To the best of our knowledge, yes.  Keep in mind, this program has gone through revisions and the home would have to qualify for the latest version.  This means that a home built during a later version could have a tough time qualifying under the latest version.  If you built an energy efficient home back in 2012, there is still a good chance it could qualify.  The home would still have to be modeled into the software and go through the site visit and testing.  I believe the IRS has limitations on how far back you can amend tax returns.  Again, you will want to meet with a tax professional prior to making a decision on whether or not you can get this credit.

You can get the 8908 form by visiting the IRS Official Website.  GreenEdge of Michigan is a RESNET Certified Rater who can qualify a home for this credit.  We have clients currently working with this program.

***this blog is not intended to be tax advice and we recommend you consult with a tax professional prior to making any decisions with regard to this credit***

 

3 Responses to EPACT Energy Efficient Home Tax Credit Extended!

  1. Jeffrey Heller March 31, 2014 at 2:59 pm #

    What happens if you are the person that built the house? I have a certificate in hand but it looks as if I have to file a small business, Partnerships and S corporations, report this amount on Schedule K. All others, report this amount on Form 3800, line 1p . .

    both of which are business (which I am not). How does an individual handle this?

    Thanks,
    Jeff

    • Andrew Lesperance June 10, 2014 at 12:12 pm #

      Jeffrey – Unfortunately this tax credit is only designed for a business that has built a home. From my understanding, a homeowner who builds their own home does not qualify. I would recommend you check with a CPA to check if there is any way a homeowner can qualify.

      Thanks for your question.

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