Begun Construction Provisions

Prior to the modifications that were introduced in 2012, the section 45L taxation credit was available solely for a qualified energy facility placed in service prior to the end of December 2014.

The problem is that energy efficiency projects will quite often require a longer period of time in order to be completed. This is one of the main reasons for the changed conditions that have been included in the American Taxpayer Relief Act of 2012.

The older requirement for facilities that have to be placed in service prior to the end of the term was replaced with a requirement for the construction of the energy efficient building to begin prior to the end of the year. Such constructions can qualify for the taxation incentives provided under section 45L.

Definition of Begun Construction

The next important question that will need to be answered in connection to the 45L credit is what projects correspond to the begun construction requirement. The IRS website is quite helpful in this regard, providing a lot of information about the specifics for begun constructions.

There are two main ways for determining when the construction of the facility has begun. The first is physical work of a significant nature. Physical work of a significant nature is defined as work on the construction that has been started either by the eligible taxpayer or by employees doing work for this person. On-site and off-site work both qualify as physical work of a significant nature.

This category does not include any preliminary work on the building. Design, for example, will not quality the building for the section 45L credit. Research, licensing, obtaining permits, looking for finances and securing will also not qualify.

The second requirement is meeting the safe harbor requirements. Under this requirement, the taxpayer should have incurred five percent or more of the total construction cost prior to December 31, 2014. In addition, IRS has to make sure that the taxpayer is making continuous efforts towards the completion of the project. There may be certain interferences that will be excluded from consideration. Such interferences include:

• Severe weather that stands in the way of safe construction work
• Natural disasters
• Labor stoppages, strikes and other employment-related problems
• Inability to obtain all of the necessary equipment for construction purposes
• Supply shortages
• Financial delays that can reach up to six months
• Delays based on requests from either state or federal agencies

These are the most important criteria that have to be met for begun construction to be considered. The IRS website features additional information about more specific scenarios and how to determine whether these will stand in the way of obtaining the 45L credit.

The post 45L Credit Requirements for Begun Constructions appeared first on Claris Energy.

The popularity of solar equipment is growing all the time, particularly in areas that see a big number of sunny days per year. Apart from providing an opportunity for green energy production, solar panels can also be used for energy efficient water heating.

The execution of such projects delivers a vast range of benefits going beyond the energy efficient home credit. Here are some of the most important advantages to consider.

Diminished Use of Energy

Conventional water heaters need a lot of energy, which can add up to a large annual amount. According to the Solar Energy Laboratory at the University of Wisconsin, a four-member family consumes 6,400 kilowatt hours of electricity per year for water heating.

Solar equipment reduces that significant amount. In addition, it will reduce the carbon footprint of water heating. The conventional electric water heater is responsible for eight tons of carbon dioxide emissions per year. It’s easy to see how the use of solar equipment is both cost-efficient and environment-friendly.

The cost-effectiveness of such systems will depend on location and the number of sunny days per year. These factors have to be taken in consideration, if you’re considering this possibility for getting access to an energy efficient home credit.

Reduced Cost of Equipment

Photovoltaics used to be very costly a couple of years ago. Today, the technology is readily accessible and more affordable than ever.

A residential solar water heating system will range in cost from 1,500 to 3,500 dollars, depending on its size and the water heating needs of the household. In this sense, electric and gas heaters are much less expensive.

The electricity savings that solar water heating produces, however, will bring a great return on investment. Depending on the location and the use of the system, solar water heaters will pay themselves off in four to eight years. The lifespan of such equipment ranges from 15 to 30 years, which makes it one of the most affordable options on the market.

A Few Shortcomings to Keep in Mind

Solar water heating is a great possibility if you’re interested in obtaining an energy efficient home credit but it’s far from a universal solution. There are a few shortcomings and limitations to consider in advance.

Many areas that see a cold and snowy winter will require the selection of a backup water heating system. Photovoltaic systems are not reliable 365 days per year. Fuel or gas backups are the most commonly selected options.

The solar panels have to be protected against low temperature and freezing. Thus, you’ll need to keep wintertime maintenance in consideration.

Finally, a tank will be required for water collection. This tank could get quite heated during the summer days. Choosing the right location for its placement will be essential.

The execution of such projects will qualify you for an energy efficient home credit in the period until the end of 2016. You can claim a credit of up to 30 percent of the equipment’s cost. On-site preparation, assembly and labor costs are included in the calculation. Do your research and make sure you understand the possibilities before picking solar water heating or another type of green technology for your home.

The post Solar Water Heating: Qualifying for an Energy Efficient Home Credit appeared first on Claris Energy.

Property Requirements

The section 45L credit is available for residential projects executed on the territory of the US. The property should have been completed and occupied prior to December 31, 2014.

The dwelling unit should be located in a building that is at most three-stories high. In other words, the incentive applies to the construction of apartment buildings and residential condominiums or the rehabilitation of older such buildings.

To qualify for a section 45L incentive, the building should have heating and cooling energy consumption that is 50 percent lower than the one of a comparable residential unit. Third party certification will be needed to prove the energy efficiency of the building.

Who can Get the 45L Credit

The eligible contractor is the one that can claim the energy efficiency taxation incentive for 2014.

The contractor is defined either as the individual who constructed the new residential unit or the manufacturer of an energy efficient manufactured home.

Energy Savings

In order to qualify for the taxation incentive, the dwelling unit should have energy consumption that’s 50 percent lower than the requirements listed in the 2006 International Energy Conservation Code.

The 2006 energy conservation code features requirements and prescriptions for both commercial and residential energy-efficient buildings. These focus on roofing materials, floors, fenestration, opportunities for reducing air leakage, HVAC equipment performance and lighting.

If the building is independently certified to correspond to these requirements, the contractor will be eligible for a home tax credit of up to 2,000 dollars.

Qualification and Application Process

If you believe that your 2014 dwelling unit project corresponds to the above mentioned requirements, you’ll need to ask for an independent evaluation and certification. The parties responsible for the process use accredited software to make the energy savings calculations.

The energy features of the dwelling unit will also have to be inspected and assessed on site.

Don’t hesitate to seek certification, especially if you executed a larger project in 2014. Several case studies show that the amount provided under section 45L can be impressive. According to one of the case studies, a contractor that constructed 83 dwelling units (all of which adhering to the energy efficiency requirements) got a tax credit of 166,000 dollars for the entire project. The project certification fee in this case was 36,000 dollars and the net benefit was 144,000 dollars.

An eligible certifier is any licensed third party that has no relationship with the contractor that has been accredited by the Residential Energy Services Network or another rating network of the same caliber.

Getting certified for a 45L credit is far from a challenging task, as long as you find a reliable partner. Many new buildings adhere to the strictest energy efficiency requirements, which qualifies them for an incentive automatically. Get started with the certification right now, if you want to make use of the incentive for your 2014 residential project.

The post 2014 Green Home Construction? Claim Your 45L Credit Now appeared first on Claris Energy.

The following 2015 tax guide will acquaint you with some of the changes, as well as the incentives that you can make use of.

2014 Tax Break Extenders

This was one of the biggest news in December, 2014. The government finally decided to extend several energy efficiency incentives, including the section 45L energy tax credit. This means you can claim the amount for projects executed until December 31, 2014.

The package approved in the end of the year included nearly 50 tax breaks. The retroactive, one year extension is only valid for 2014 but some industry experts believe that new extensions will be examined by Senate shortly.

Some of the tax breaks approved in the end of 2014 include section 45L energy tax credit for new home energy efficiency, the qualified energy efficiency improvements tax credit and the section 179D energy efficient commercial building deduction.

How Much can You Claim?

An energy tax credit sounds great but what is the exact value of the incentive? It depends on the particular tax credit or deduction that you go for.

The maximum incentive you can claim under section 179D is 1.8 dollars per square foot of qualifying commercial real estate for whole building performance. Alternatively, the incentive is 0.60 dollars per square foot for building envelope improvements, HVAC improvements or lighting improvements.

Under section 45L energy tax credit conditions, you can expect an incentive that totals 2,000 dollars per unit for a newly-constructed residential building that is either rental or owner-occupied. Since the energy efficiency requirements for new residential buildings have become stricter over the past years, many buildings will qualify for the energy tax credit automatically. Check the conditions, if you have executed a residential project in 2014 – chances are that you’ll benefit from an attractive taxation incentive.

How to Get the Energy Tax Credit

Getting the energy tax credit, whether for a residential or a commercial project, is a relatively simple tax. For a start, you’ll need to have the building assessed independently. It will need to correspond to certain energy efficiency requirements and the test is performed by a third party.

Whether you’re a homeowner or an investor, you’ll need to have a good idea about the right IRS form to use. The form has to be filled out correctly and submitted with your taxes. You can find more information about the forms and the information that you need to provide on the IRS website.

Finally, understand the credit maximums and the particular incentives that can be carried forward. Some of the energy efficiency tax credits can be carried over to coming years, in case they exceed the amount you owe in taxes.

Apart from giving these incentives a try, you may also look for state and local programs encouraging energy efficiency improvements. These may save you even more money and enable you to get the best possible return on your investment.

The post 2015 Tax Guide: Making Use of Your Energy Tax Credit appeared first on Claris Energy.

What does the future have to hold for this kind of electricity production? Homeowners and other individuals interested in executing sustainability projects involving solar property have a couple of great opportunities to make use of in 2015.

The Residential Renewable Energy Tax Credit

The Residential Renewable Energy Tax Credit gives homeowners interested in sustainability projects a stimulus for the purchase and the installation of solar property. This credit is valid for the systems that have been placed in service prior to the end of 2016.

There is no maximum energy tax credit for such systems and a homeowner can install solar property in a primary residence, a second home or a vacation property. Incentives are also available for the homeowners that install solar water-heating property.

The rebate amount under this incentive is 30 percent of the qualified expenditure for system purchase, labor costs and installation.

If the credit is higher than the amount that an individual owes in taxes, it can be carried forward to the next year. It’s unclear whether any unused credit will be carried forward after the end of the program in 2016.

Opportunities for Commercial System Installations

Tax credits for solar system purchases are also available for commercial installations. The solar investment tax credit is also available through the end of 2016 and it applies to the installation of both photovoltaic energy production systems and water heating equipment. There could be some differences between the energy tax credit available for residential and the one for commercial entities. Talking to a tax professional about the rules, as well as about the ability to carry the tax credit forward is the best policy in terms of maximizing the benefits from the opportunity.

Other Initiatives and Benefits of Solar Installations

Grants and other taxation incentives are available to investors interested in developing sustainable energy production through the use of photovoltaics.

State incentive programs are available and these vary from one part of the country to another. The New York State Incentive Program, for example, is available through the end of 2015. Florida is another state that has lucrative opportunities for the production of energy through solar installations. Checking local incentives, their conditions and the qualification requirements will determine whether the project will give access to some energy tax credit.

The Obama administration has proposed billions in additional funds for alternative energy production stimuli. Some of these new opportunities will probably be announced in the beginning of 2015, giving investors even better conditions for the execution of such projects.

The prominence of solar power production will continue growing in the years to come. Investing in this kind of installation right now will help you save money and give you access to additional stimuli. The energy tax credit is just one of those opportunities.

The post Solar Installations and Energy Tax Credits in 2015 appeared first on Claris Energy.

Are you familiar with this financial stimulus? You need to understand several important facts about the 179D credit.

Who Can Qualify

The 179D tax credit is available to several types of companies, entrepreneurs and professionals:

• The owners of energy efficient commercial buildings
• Architects, designers and engineers working on energy efficiency municipal projects

Types of Buildings Included Under the Provision

Commercial building is a broad term that refers to several different kinds of constructions. The 179D tax credit will be available to entities that design or own the following:

• All buildings used for commercial purposes
• All buildings used for industrial purposes
• Multi-family residential buildings that are at least four stories in height
• Dormitory buildings
• Buildings that were designed for other purposes but were later on converted for commercial use
• Unconditioned attached and detached garage spaces

Percentages

To qualify for the 179D tax credit, a building should have electricity cost savings of 10 percent for heating and cooling stemming from the envelope improvements. In addition, 20 percent of the reduction should stem from lighting improvements and 20 percent should stem from HVAC improvements.

A vast range of projects can be executed to reach these percentages. The possibilities include the use of high efficiency wall insulation, energy-efficient fixtures, natural ventilation, automatic thermostats, energy-efficient air conditioning systems, the optimal use of daylight and the use of high-performance glazing.

To calculate the savings, third parties responsible for certification will take a look at various types of bills. These include electricity used for lighting, cooling, ventilation, heating and hot water systems.

How Designers Can Benefit from the Deduction

Federal, state and local governments can also apply for the 179D tax credit. This provision is included under an initiative for improved energy efficiency of municipal, governmental and federal buildings.

Since governments and municipalities cannot apply for a tax incentive, they can pass the opportunity over to the designer, engineer and architect that worked on the building. This provision has enabled many small design and architecture companies to survive and do their job in the best possible way.

Maximum Deduction

The maximum incentive under section 179D is 1.8 dollars per square foot. The HVAC improvements contribute to 0.60 dollars per square foot, lighting improvements – 0.60 dollars per square foot and building envelope – 0.60 dollars per square foot.

To qualify for these incentives, the building must undergo independent evaluation and certification. It will be compared to a similar commercial building to determine whether the energy saving reaches or exceeds 50 percent.

The 179D tax credit was recently extended retroactively for one more year. This means that projects executed throughout 2014 can qualify for the incentive. Claiming the credit is a simple process, once the verification has been completed. Finding the right professional for the job is essential for getting the biggest possible tax credit and making the most of the Section 179D provision.

The post Five Important Things to Know About the 179D Tax Credit appeared first on Claris Energy.

The 45L Tax Credit: An Overview

EPAct Section 45L provides an incentive totaling 2,000 dollars in the form of a tax credit per unit for a newly constructed owner-occupied or rental residential unit, as well as for improvements carried out in already existing properties.

In order to qualify for the incentive, each residential unit will have to adhere to particular energy efficiency standards. The tax credit can be claimed for the year during which the unit becomes occupied.

The current energy efficiency standards have become rather strict, which is why many buildings constructed during 2014 qualify for the Section 45L incentive automatically.

The procedure is simple – any unit will be compared to a reference building that has a similar size and is located within the same climate zone. The heating and cooling consumption has to be at least 50 percent lower than the one for the reference unit. Anywhere between 10 and 50 percent of the reduction should stem from building envelope modifications and improvements.

There is an additional opportunity to get a lower incentive. Each residential unit that has a 30 percent heating and cooling energy reduction will qualify for a 1,000-dollar incentive.

Who can Qualify for the Incentive?

The taxation incentive provided under EPAct Section 45L is available for the developers of numerous types of residential buildings – single-family residences, apartment buildings and condominiums. The building has to be located in the US and its construction should have been completed before the end of 2014.

The residential building has to be a dwelling unit for the developer to qualify for a tax incentive. A dwelling unit is defined as a single residential unit that gives access to complete and independent living conditions to one or more individuals. These conditions include permanent provisions for eating and cooking, sleeping and sanitation.

The dwelling unit cannot be located in a building that exceeds three stories in height.

Developers need to hire a certified third party that will carry out an extensive energy audit and make the conclusion about the energy efficiency of the building in comparison to the reference unit. The certification team will usually consist of engineers and tax experts that help developers make the most of the opportunity.

Timeframe and Other Conditions

The building needs to have been constructed and occupied between August 8, 2005 and December 31, 2014 for the developer to claim the incentive. There’s no prerequisite for the developer to be the one occupying the residential dwelling unit.

The credit does not have to be used within a single taxation year. Any unused amount can be carried forward for a period of up to 20 years.

A developer can claim the Section 45L tax credit for a past year by amending previous tax return. This means amending either Form 1045 for individuals or Form 1139 for corporations.

These are the conditions under which the EPAct Section 45L incentive will be available during taxation year 2015. If you’ve executed such projects over the past year, the time is right to start working on certification and the documents needed to qualify for the incentive.

The post The Incentives Provided under EPAct Section 45L: What to Expect in 2015 appeared first on Claris Energy.

Senate approved the tax extenders bill with 76 votes in favor and 16 against. Only 60 votes are needed for such provisions to pass. The tax extenders bill will renew various energy efficiency initiatives, including the section 45L tax credits and section 179D energy efficient commercial building deductions.

All of the provisions included in the package will be extended to cover improvements made and projects executed throughout 2014. The bill will not be renewed for the tax year 2015, Forbes reported. Further extension will once again necessitate the involvement of Congress and it will probably be accompanied by lengthy debates.

The final step of the bill approval is expected to be completed within a week. President Obama will have to sign the provision into a law during the final days of December.

According to Forbes, the lengthy procedure that accompanied the passing of the bill will probably delay the opening of tax season. A start date to the 2015 season is yet to be announced by the IRS Commissioner.

Reuters quoted Senate Finance Committee Chairman Ron Wyden as saying: “With this tax bill, the Congress is turning in its tax homework 11 months late…this package of tax incentives will last just two weeks before families and businesses are thrown back into the dark with respect to the taxes they owe. The legislation accomplishes nothing for 2015.”

The tax extenders bill known as Tax Increase Prevention Act of 2014 involves some major tax breaks for wind power generation and energy efficiency research. Provisions like section 45L tax credits will help construction companies and other entities involved in energy efficient apartment and residential building development.

Homeowners that invest in green improvements will also get to enjoy the incentives that will come under the Tax Increase Prevention Act of 2014.

The tax extenders bill is expected to cost taxpayers 41.6 billion dollars in the coming 10 years. There haven’t been new federal sources dedicated to covering at least a portion of the amount. As a result, financial analysts worry that the tax extenders bill will contribute to larger budget deficit.

The energy efficiency portion of the extenders bill is worth 6.4 billion dollars. The credit for business research totals 7.6 billion dollars and slightly over five billion dollars will be dedicated to foreign profit tax deference.

There has been some controversy about the tax extenders bill and a number of questionable provisions are included in the total package. Still, energy efficiency and green energy production lobbyists are satisfied by the partial success. Though they pushed for a two-year extension of incentives like the section 45L tax credits, the Tax Increase Prevention Act of 2014 is certainly a move in the right direction.

The post Senate Renews Section 45L Tax Credits appeared first on Claris Energy.

The fate of the tax extenders bill known as Tax Increase Prevention Act of 2014 is now in the hands of the US Senate. Will the extension of EPAct 45L and other energy efficiency initiatives be approved by the end of the year?

Expectations and Predictions

Many analysts and industry experts have shared their opinion about the possibility of the tax extenders bill being approved by the end of the year.

The first factor to keep in mind is that the US House of Representatives approved the bill with an overwhelming majority of 378 votes in favor and only 46 votes against. This result indicates a positive attitude towards energy efficiency provisions and their extension. Thus, it’s highly likely for the US Senate to give the bill its support and make the decision quickly.

According to a Reuters report from December 15, the tax extenders bill is expected to win the Senate approval within days.

“We are confident that within the next 72 hours the Senate will send a bill to the president that provides the full tranche of 55 tax credits,” Height Securities analyst Henrietta Treyz said as quoted by Reuters.

The Implication of the Tax Extenders Bill

If approved, the tax extenders bill will impact major investors in the field of green energy production and energy efficient improvements. The ordinary US homeowner will also benefit from tax incentives for green home modifications.

Some of the key provisions in the Tax Increase Prevention Act of 2014 include the following:

• Section 45L tax credits for new home energy efficiency. In order to benefit from the incentive, builders will have to exceed energy efficiency standards for a comparable building by at least 50 percent.
• Qualified energy efficiency improvements tax credit: a credit available for the execution of projects like energy efficient window installations and other qualified home upgrades.
• Section 179D energy efficient commercial building deduction: the deduction totals up to 1.8 dollars per square foot of commercial building space that exceeds the nationally-set energy efficiency minimum requirements.

These are just three of the 55 tax credits and incentives that will be extended throughout 2014 after the approval of the bill.

What’s in the Future?

If the tax extenders bill gets Senate and presidential support, it will be valid solely for a one-year period. This means that debates about the future of such energy efficiency incentives will once again take place in the end of 2015.

The on-again, off-again nature of incentives like EPAct 45L raises some concerns about the stability of the framework and the administrative commitment to renewable technology development and improved energy efficiency. Only time will tell whether such provisions are going to become permanent, giving investors and homeowners the financial incentives necessary for the execution of such projects.

The post Will the EPAct 45L Extension Be Approved by the End of the Year? appeared first on Claris Energy.

The energy efficient home credit is one of the popular possibilities for lowering the tax amount. It’s not the only possibility out there and the following article will acquaint you with the types of projects you can execute and benefit from a tax decrease.

The Non-Business Energy Property Credit

The non-business energy property credit expired in December 2013. You still may claim that credit for improvements executed until the end of its duration, if you haven’t reached the lifetime credit limit in the previous years.

The credit you get totals 10 percent of the value of energy efficient purchases you have made for residential property. Insulation, energy efficient windows, doors and roof improvements all qualify for the non-business energy property credit.

A credit could also be available for the purchase of water heaters and air conditioning systems. The amount is different for each type of item and could reach up to 100 percent of the value. The maximum lifetime limit of this credit is 500 dollars and it applies to improvements made in a primary US residence.

In order to benefit from the credit, you need certification from the manufacturer that proves a particular item corresponds to energy efficiency requirements. The certification should be kept with your tax records rather than attached to your return.

The Residential Energy Efficiency Property Credit

This energy efficient home credit is valid until the end of 2016.

This energy efficient home credit totals 30 percent of the value of qualifying equipment. Unlike the non-business energy property credit, this one applies to installations in a primary residence, a secondary residence or a vacation home.

Solar water heating systems, solar energy production property, wind energy production property, geothermal heat pumps and fuel cells will all qualify you for the residential energy efficiency property credit.

For most types of property, there is no dollar limit to the credit amount. The credit can be carried forward to the coming years, if its amount exceeds the taxes that you owe.

How to Get a Tax Credit

Getting a tax credit is a relatively simple task and the IRS website contains a lot of detailed information.

To claim any of these two credits, you need to use Form 5695. The form contains information about the type of energy efficient equipment you’ve installed on your property, its cost and the amount of credit you’ll benefit from.

This FAQ section on the IRS website provides additional information about energy efficient home credits and how to claim them.

If you’ve invested in energy efficient improvements during 2013 and 2014, you can easily decrease the amount of taxes you owe. Energy efficiency is starting to play a pivotal role in today’s economic climate. Chances are that incentives for homeowners will continue being provided in the years to come – plan home improvements accordingly to benefit from such stimuli.

The post Lowering Taxes with an Energy Efficient Home Credit and Other Incentives appeared first on Claris Energy.