Can a taxpayer who installs a solar water heater in 2009 claim the residential energy credit if the home is occupied in 2010?

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The residential energy credit allows taxpayers to claim a credit for certain energy-efficient home improvements, including solar water heaters. In this case, the key point is that the taxpayer installed the solar water heater in 2009. While the improvements are credited based on the year they are installed, the taxpayer is able to take the credit on their 2010 tax return because the installation and eventual activation of the solar water heater occurred during that tax year.

The credit is available for eligible installations and can be claimed in the tax year following installation, provided the installation occurred before the end of the year and the system is operational. Since the water heater was installed in 2009, the taxpayer can report that expenditure on their 2010 tax return, taking advantage of the residential energy credit available for systems that meet the requirements.

This understanding is crucial as it reflects the IRS stance on energy credits, emphasizing that although the installation happened in one year, the credit can still be applicable when the system is actively being used in the following year.

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