Residential & Commercial Tax Credits Reinstated Through 2020
President Trump recently signed H.R.1865 and H.R.1158—funding bills for Fiscal Year (FY) 2020 which included two of ACCA’s legislative priorities – reinstating the residential energy efficiency tax credit and Section 179D deductions for commercial buildings. These provisions had expired in 2017 but will be extended through 2020 and retroactive for 2018 and 2019.
The first provision reinstates a portion of Section 25C of the Federal Tax Code that offers a tax credit to individuals who improve the energy efficiency of their homes. For qualified HVAC improvements, homeowners may be eligible to claim 25C tax credits equal to 10 percent of the installed costs, and a maximum credit of $500. The 25C tax credit will provide much needed relief consumers while also helping contractors deliver efficiency to their customers. This provision is retroactive back to 2018 and expires Dec. 31, 2020.
The second provision reinstates Section 179D of the Federal Tax Code which allows for tax deductions on energy efficient commercial buildings. In addition to implementing these deductions for FY2020, the legislation will retroactively instate the deductions for the past two years (Section 179D expired on December 31, 2017). Section 179D is especially useful for building owners, as investing in energy efficient enhancements allows them to save significantly on building operating costs.
The energy efficiency provisions in both Sections 25C and 179D will undoubtedly create and protect jobs for American workers, while also moving our country closer to energy independence. Both provisions are steps in the right direction regarding energy efficiency. However, there is more work to be done and ACCA is actively lobbying for long-term solutions for the 25C and 179D provisions.
In fact, ACCA is leading the charge to support new legislation, the Home Energy Savings Act which would extend Section 25C through 2026. If passed, this legislation would also increase the percentage from 10 to 15 and raise the lifetime cap to $1,200. Most important, the Home Energy Savings Act would HVAC systems to be installed according to ACCA’s quality installation standards in order to qualify for the tax credits!
ACCA is urging Congress to take action in the coming year on the Home Energy Savings Act because it will deliver meaningful efficiency gains to consumers and ensure they realize the benefits of their investments in highly efficient HVAC systems!
UPDATE January 23, 2020:
You can now find information about the 25C tax credit on the IRS webpage.
Instructions for Form 5695