Tax Experts
Energy Credit on a New Home
By Kevin McCormally, Editorial Director, Kiplinger.com
March 14, 2008
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Q: My wife and I built a new custom home as our sole personal residence during 2007. Can I deduct up to $500 for an energy credit on my 1040, or does the energy credit only apply to remodeling or upgrade expenses on an existing home? -- William M.
Kevin's Answer:
Although the credit refers to "improvements" to enhance energy efficiency, it's clear you can qualify for the credit if you bought qualifying materials for the construction of a new home.
This is from the instructions for the energy credit Form 5695:
You may be able to take these credits if you made energy saving improvements to your home located in the United States in 2007. For credit purposes, costs are treated as being paid when the original installation of the item is completed, or in the case of costs connected with the construction or reconstruction of your home, when your original use of the constructed or reconstructed home begins. If less than 80% of the use of an item is for nonbusiness purposes, only that portion of the costs that are allocable to the nonbusiness use can be used to determine the credit.
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