Remodeling a Residence
Improvements vs Repairs
Taxpayers may claim an energy credit for qualifying home improvements. Repair expenditures that do not add much to the value, utility, or the life of the property and instead keep the property in good condition are not added to the basis.
You may be able to take a credit equal to the sum of:
10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2020, and
Any residential energy property costs paid or incurred in 2020.
However, this credit is limited as follows.
A total combined credit limit of $500 for all tax years after 2005.
A combined credit limit of $200 for windows for all tax years after 2005.
A credit limit for residential energy property costs for 2020 of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property.
Home.
A home is where you lived in 2020 and can include a house, houseboat, mobile home, cooperative apartment, condominium, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.
You must reduce the basis of your home by the amount of any credit allowed.
Main home.
Your main home is generally the home where you live most of the time. A temporary absence due to special circumstances, such as illness, education, business, military service, or vacation, won't change your main home.
Costs.
For purposes of both credits, costs are treated as being paid when the original installation of the item is completed, or, in the case of costs connected with the reconstruction of your home, when your original use of the reconstructed home begins. For purposes of the residential energy efficient property credit only, costs connected with the construction of a home are treated as being paid when your original use of the constructed home begins. If less than 80% of the use of an item is for nonbusiness purposes, only that portion of the costs that is allocable to the nonbusiness use can be used to determine either credit.
.Only the residential energy efficient property credit (Part I) is available for both existing homes and homes being constructed. The nonbusiness energy property credit (Part II) is only available for existing homes..
.IRS guidance issued with respect to the energy credit under section 48, such as Notice 2018-59, does not apply to the residential energy credits..
Association or cooperative costs.
If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of such association or corporation.