Discussion:Residential Energy Tax Credit for a new home

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Discussion Forum Index --> Tax Questions --> Residential Energy Tax Credit for a new home


Blrgcpa (talk|edits) said:

10 February 2007
I'm fully aware that the residential energy tax credit is to improve energy efficiency of an existing home.

I'm also aware that the builder who builds an energy efficient home gets a $2000. credit/home.

My question is about the purchaser of the new home. Can they get a credit?

I refer you to pub 553, rev 3/06 and the instructions for form 5695. The wording in both are identical.

It says: " ...or in the case of costs connected with the construction...of your home, when your original use of the constructed...home begins."

The newly constructed home is not "used" until the purchaser moves into it. The builder did not "use" the new house, the purchaser did.

Client went to contract in 2006 to have a house built. I guess in this market, the builder was not willing to start construction without a buyer. The house was completed and closed in 2006. Client moved into new house in 2006. It is the new primary residence in the US of the client.

I'd like to know your opinions.

Thanks in advance.

CATAXES (talk|edits) said:

10 February 2007
You were correct when you noted that builder gets available credits on new construction home. Taxpayer can only add to existing home.

Blrgcpa (talk|edits) said:

11 February 2007
So what do they mean when they say "...when your original use of the constructed...home begins"?

The builder did not use the home. The original use began when the purchaser closed on the house and moved in.

Sandysea (talk|edits) said:

11 February 2007
Sounds like a "spec house" and if so, the contractor most likely took the credit as he was responsible for the mortgage until the home was sold. If a custom home is built, then the buyer typically takes the credit because they choose the appliances, etc. The builder constructively used the home if it was a spec house....

Coastalcpa (talk|edits) said:

17 February 2007
So a taxpayer who bought a new home in 2006 doesn't get to take the credits but a taxpayer who made improvements to a home he already lived in does get to take credits? Can someone clarify this for me??

Riley2 (talk|edits) said:

17 February 2007
RIA editors say that the residence must be a principal residence at the time the improvements are installed. JK Lasser says much the same thing. Sec. 25C uses the phrase "installed in or on a dwelling unit located in the United States and owned and used by the taxpayer as the taxpayer's principal residence." This verbiage would suggest that an installation done on a dwelling unit that may become someone's principal residence at some point in time would not qualify. In addition, the committee reports suggest that the any building eligible for the Sec. 45L builder's credit is not eligible for the Sec. 25C homeowner's credit.

Kytaxpreparer (talk|edits) said:

18 February 2007
I have been allowing the credit to those who have built new homes in '06. I interpeted the wording to mean that costs incurred in 06' qualified and the wording mentioned above, :when original use of the constructed ....."I took as meaning your original use of home began in 2006. I guess I looked at it as one has a home built and purposely buys the star energy appliances - which they are paying for -so they can take the credit??

Lhhesscpa (talk|edits) said:

18 February 2007
Regarding what home would qualify, Notice 2006-26 Secs 4.05 and 5.03 require that "(1) The component is installed in or on a dwelling unit located in the United States and, at the time of installation, the dwelling unit is owned and used by the taxpayer as the taxpayer's principal residence (within the meaning of § 121) (2) The original use of the component commences with the taxpayer." In addition, Secs 4.06 and 5.04 say the credit for Eligible Building Envelope Components doesn't apply to installation costs of but it does for Qualified Energy Property. -- Larry Hess, CPA, Albuquerque, NM - Talk to me

Swhiting (talk|edits) said:

20 February 2007
Would these credits apply to building additions (expansion of an existing home, not remodeling)?

Riley2 (talk|edits) said:

20 February 2007
Based on what Lhhesscpa is citing, the answer would appear to be yes.

Lwoods4962 (talk|edits) said:

22 February 2007
I read Larry's recitation of the Notice above but I am having trouble with the phrase "owned and used". A new home constructed in 2006 most likely was not used until after all construction was complete although it was owned. Still seems to me it applies to replacement items not new construction items. I haven't been able to find this specifically, however.

Pegoo (talk|edits) said:

22 February 2007
Builder gets the credit, purchaser doesn't get tax benefits until he purchase additional qualified add ons.

Lwarnock (talk|edits) said:

2 March 2007
Form 5695 instruction states that the date of installation (for reconstructed or contructed homes) is at the time original use of the (constructed house) begins. The taxpayer owns the house at that point?? Thus, assuming the house does not meet criteria for builder's credit then it seems proper for the owner to take the credit. Especially if he contracted to have the house built.

Riley2 (talk|edits) said:

2 March 2007
What the law actually says that an amount is considered to be paid for a solar or fuel cell property when the original use of the constructed property begins. This rule applies only to the solar credits (electrical and water-heater) and fuel cell property.

Example, you install a solar electrical plant on your newly constructed weekend home in 2006, but you don’t begin using the home until 2007. In that case, for credit purposes, the amount that you paid for the solar plant is considered to be paid in 2007.

Not sure why they allow the solar credits on weekend homes and principal residences, but the fuel cell credit is only on a principal residence.

Katie.pa (talk|edits) said:

25 March 2008
Still confused about new addition to existing home. Does homeowner qualify for credit for energy star doors, windows and insulation on new addition, not replacement?

Umk395 (talk|edits) said:

17 December 2009
How does the energy tax credit apply when a taxpayer has made a DEPOSIT for new enegy-efficient windows in Nov 2009, but will not have them installed until Jan 22, 2010?

Ddoshan (talk|edits) said:

17 December 2009
I believe you would go by the date the product was placed in service. So if the credit is only available for the 2009 tax year (not sure) then I would suspect you would be out of luck.

Umk395 (talk|edits) said:

17 December 2009
Number 5 answers the question.

http://www.irs.gov/newsroom/article/0,,id=214979,00.html


Just found this.

Taxestaxes (talk|edits) said:

5 January 2010
Sorry to beat an old horse...but trying to clarify for upcoming tax year. THe Nonbusiness energy credit says its for your main home; the residential energy credit does not have to be. What if taxypayer is temp. living with someone until his main home is finished being built - by himself - would he qualify for all the credits - windows, doors, insulation? As well, what if he paid for the geothermal in 2009, but doesnt move into home until 2010 - can he take the credit on 2009? Thanks so much.

R2 (talk|edits) said:

5 January 2010
For Internal Revenue Code § 25C credits, the home must be owned and used as a principal residence as the time of installation.

For Internal Revenue Code § 25D credits, the credit is claimed on newly constructed residences when the taxpayer moves in.

Taxestaxes (talk|edits) said:

6 January 2010
www.irs.gov/newsroom/article/0,,id=217792,00.html?portlet=7

Tpcooper (talk|edits) said:

13 July 2012
Yes I realize this thread is 2.5 years old! I am still a little unclear about the rules for new homes for Internal Revenue Code § 25D credits.

My clients situation is that a custom home is being built with a geothermal heat pump, but rather than the client paying each individual contractor, the builder is selling my client the home as a finished product.

If the builder provides my client the invoices for the geothermal heat pump and installation, is my client going to be okay taking the credit even though the home was sold as a finished product as long as the builder provides an itemization for the geothermal heat pump installation?

Based on my readings, I think I would feel more comfortable if my client purchased the heat pump and the paid for the installation directly, even though I think the builder providing an itemization might be okay.

Thanks for any help or guidance.

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