Home Energy Efficiency Heating Credit

Subject to certain limitations, taxpayers and entities that are owners of residential properties located in Massachusetts may claim a credit in the amount of the net expenditures for the purchase and installation of energy-efficient heating items in such properties.

Energy-efficient heating items include:

·         home insulation;

·         new window installation;

·         advanced programmable thermostats;

·         fuel efficient furnaces, boilers, oil, gas, propane, or electric heating systems; 

·         solar domestic hot water systems;

·         materials for insulation or sealing of a duct, attic, basement, rim joint or wall;

·         pipe insulation for heating systems; and

·         any energy-efficient item similarly related to heat conservation (as opposed to some other type of energy-efficient items.)

Home Energy Efficiency Heating Credit - Examples of Energy-Efficient Heating Items

Qualified purchases include:

·         energy-efficient heating items purchased on or after November 1, 2005 but not later than March 31, 2006, and

·         costs related to the installation of such energy-efficient heating items in residential property located in Massachusetts.

Multiple Residence/Ownership Properties:

·         If eligible property is owned by two or more participants, the credit is available to each participant in proportion to its ownership interest in such property. Joint owners of residential property may share any credit claimed for energy-efficient heating items in the same proportion as their ownership interest in the residential property;

·         A taxpayer who owns a condominium or a cooperative dwelling (i.e., the taxpayer is a stockholder in a cooperative housing corporation) and for whom such purchases are accounted for in a common area fee or special assessment against such costs may claim a proportionate share of the expenditure for energy-efficient heating items by such condominium association or cooperative housing corporation as may be reasonably attributed to the taxpayer’s proportionate ownership share of the condominium or cooperative dwelling.

Calculation of The Net Expenditure For Energy-Efficient Heating Items:

The total purchase price for qualified purchases plus installation costs must be reduced by the following amounts: 

·         any credits received pursuant to the Internal Revenue Code;

·         any grants or rebates received from the United States Department of Housing and Urban Development; and

·         any rebates or discounts received from an electric utility or gas utility. The resultant amount is the net expenditure for purposes of the credit. 

Amount of Credit:

The maximum aggregate amount of the energy-efficiency heating credit that may be claimed by a qualifying taxpayer for the cost of energy efficient heating items is the lesser of:

·         30% of the net expenditure for the qualifying purchases; or

·         $600 ($1,000 for a multi-unit dwelling).

If a qualifying taxpayer owns more than one residential property located in Massachusetts (multiple single family houses or two multi-unit dwellings), the maximum aggregate amount of the energy-efficiency heating credit that a taxpayer may claim is the lesser of 30% of the net expenditure for the qualifying purchases or $1,000.

Joint owners of a residential property must share any credit available to the property in the same proportion as their ownership interest.

Carryover of the Credit:

The credit may be taken in taxable year 2005 or 2006, regardless of the exact date on which any qualifying purchases were made. The amount of credit that exceeds the total tax due for the taxable year in which the credit is taken may be carried over, as reduced, and applied against the tax liability for the next taxable year.

·         Personal Income Tax - the amount of the credit claimed may not exceed the taxpayer’s personal income tax liability for that year.

·         Corporate Excise - the amount of the credit cannot reduce the corporate excise below the greater of the minimum excise or 50% of the excise before credits.

Limitations on the Credit:

A taxpayer may not sell or transfer the energy-efficiency heating credit to another taxpayer.

·         Personal Income Tax - a taxpayer may not use the same expenses to claim both the Home Energy Efficiency Heating credit and the Solar Wind and Energy Credit (Renewable Energy Source Property);

·         Corporate Excise - a taxpayer may not use the same expenses to claim both the energy-efficiency heating credit and any other credit allowable under chapter 63.  

Qualification for Home Energy Efficient Heating Credit is determined by completing the following schedule:

·         for residents,  Schedule HHFC, Home Heating Fuel Credit;

·         for part-year residents and nonresident,  Schedule HHFC, Home Heating Fuel Credit. The amount of the home heating fuel credit allowable is for property located in Massachusetts. 

Schedule HHFC, Home Heating Fuel Credit Example

Where to Report on Original Tax Return; What to Enclose:

·         For personal income taxpayers, they must complete Schedule HEEC, Home Heating Fuel Credit. If qualified, enter the amount from Schedule HEEC on Form 1, Schedule Z, Line 8.

Documentation to Submit with Abatement/Amended Tax Return:

·         Massachusetts Schedule HEEC, Home Energy Efficiency Credit

Massachusetts References:

·         M.G.L. Chapter 62, Section 6(d)

·         TIR 05-18: Tax Changes Contained in "An Act Relative to Heating Energy Assistance and Tax Relief"