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Level 5
April 4, 2022

Geothermal - 26% Energy Credit - Vacation Rental with Personal Use

  • April 4, 2022
  • 2 replies
  • 23 views

Client put in a geothermal heat pump in a vacation rental with personal use (52 rental days, 38 personal use days).  Can he claim all or a portion of the 25D Residential Energy Efficient Property 26% credit?

 

Q&A #6 in Notice 2013-70 states that it cannot be claimed for an investment property that is not also used as a residence by the taxpayer.   This implies that my client can claim the credit.  Does he claim a portion of the credit?  The entire credit?  Get to depreciate the difference between the cost and the credit?

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2 replies

April 4, 2022

It is prorated, the personal portion qualifies for the §25D credit on Form 5695.

For the rental portion, check out §48 and Form 3468.

TaxGirl3Author
Level 5
April 4, 2022

Thank you very much!  I really appreciate that you took the time... to save me time 🙂