Energy and Home Owner Tax Credits Included in Budget Accord
As part of the Bipartisan Budget Act of 2018, which was signed into law on February 9, Congress retroactively extended a number of expired energy and home owner tax provisions.
The following tax credits were reinstated on a retroactive basis for 2017 only:
- Section 45L Credit for Energy-efficient New Homes: Provides a $2,000 tax credit for the construction of homes exceeding heating and cooling energy standards by 50%. The base energy code is the 2006 International Energy Conservation Code plus supplements. Builders must have tax basis in the home to claim the credit (i.e., they must own and then sell/lease the residence).
- Section 179D Energy Efficient Commercial Buildings Deduction. Provides a deduction up to $1.80 per square foot for commercial and multifamily buildings that exceed specific energy efficiency requirements under ASHRAE 2007.
- Section 25C Tax Credit for Qualified Energy Efficiency Improvements. This policy offers a credit worth up to $500 (subject to a $500 lifetime cap), with lower caps for certain products like windows, for consumers to install qualified energy-efficient upgrades.
- Mortgage insurance premiums. Subject to income phase outs, consumers who file their taxes can deduct premiums paid for private mortgage insurance in 2017.
- Mortgage forgiveness tax relief. The budget accord eliminates any taxes home owners might face due to renegotiating the terms of a home loan, which result in forgiving or canceling a portion of the outstanding mortgage, particularly in connection with short sales. The debt forgiveness pertains to debt discharged in 2017 but not in 2018.
NAHB members should note that this extension does not indicate future extensions will occur again. The White House’s official Statement of Administration Policy on the enacted bill questions the need for future extensions: “Furthermore, the Administration is concerned with future extensions of special interest tax deductions and benefits in the wake of tax cuts and reforms that were enacted in December 2017.”
Section 25D Tax Credit for Power Production Property
Congress also included a fix NAHB had sought for the Section 25D tax credit, which offers a 30% tax credit for the installation of qualifying alternative energy equipment. In 2016, Congress extended the 25D tax credit but limited its use to solar technology only.
This bill restores the ability to claim the 25D tax credit for geothermal heat pumps, small wind turbines, and fuel cell property. Unlike the credits listed above, the Section 25D tax credit remains in effect for 2018 under a phase-out regime. The applicable credit rates under the phase-out regime are:
- 30% in the case of property placed in service before Jan. 1, 2020
- 26% in the case of property placed in service after Dec. 31 2019 and before Jan. 1, 2021
- 22% in the case of property placed in service after Dec. 31 2020 and before Jan. 1, 2022
Starting in 2022, this credit is scheduled to expire.
For more information, contact J.P Delmore at 800-368-5242 x8412.
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