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By admin, May 31, 2008 1:09 pm

About The Enhanced Residential Energy Credit

1. The Energy Improvement and Extension Act makes these provisions possible.

The Energy Act makes a number of enhancements to previous legislation for years beginning after December 31, 2008.  The credit now extends through 2016, which is an additional eight years.  The cap of $2000 for solar water heating property expenses is eliminated and the credit is now 30% of the cost of the entire system.  This would allow a taxpayer who installs a $10,000 system on their property to receive a $3000 tax credit as opposed to the former cap of only $2000.  The credit is available to offset the Alternative Minimum Tax beginning with 2009.

The two news systems added to REEP qualifications are geothermal heat pump and small wind energy systems.  The small wind property must use a wind turbine to generate electricity.  The small wind property must be used in conjunction with a dwelling unit within the United States and it must be a residence of the taxpayer.  The legislation does not address this as a primary residence, so it is assumed that the taxpayer might also receive the REEP credits for a secondary residence as well.  The credit is limited to $500 per ½ kilowatt, and cannot exceed $4000.

The 30% credit is available for qualified geothermal heat pump property.  The geothermal heat pump property must be installed in conjunction with a dwelling with the United States that is a residence of the taxpayer.  As with small wind properties, the legislation does not address this as a primary residence, and it is assumed that the same 30% credit is applicable to a secondary residence.  The credit is limited to $2000.

With these enhancements, Congress is giving the American taxpayer an actual incentive to use new energy technology.  The prior credits were merely empty rhetoric in comparison to the real savings of this new legislation.  This new law offers a tax savings incentive for property owners to invest in real alternative energy solutions of wind power and solar power.  This makes REEP more than just lip service.  It makes alternative energy an affordable solution to heating and power applications by offsetting the investor’s expenses in a manner that might actually affect savings.  It represents a resolve on the part of the federal government to actually make these alternatives work for property owners.

About the Author

Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.

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