The Residential Energy Efficient Property Credit provides an incentive for taxpayers to purchase alternative energy products and equipment for their home.
Tax credits provide a dollar-for-dollar reduction in the amount of taxes that you might owe to the Internal Revenue Service (IRS) as part of your actual tax bill.
In order to qualify for the credit, the energy-saving improvements must have been made in a home located in the United States. An individual taxpayer can claim REEP credit for eligible energy efficient assets.
A taxpayer can claim a credit of 26% of your cost of the eligible property. You can include any labor costs for onsite preparation, basic installation or assembly of the property.
REEP credit is limited to an overall lifetime credit limit of $500. REEP credit is non-refundable. A nonrefundable tax credit allows taxpayers to reduce their tax liability to zero, but not below zero.
REEP credit can be applied to include the installation of solar electric property, solar water heaters, geothermal heat pumps, small wind turbines, fuel cell property and qualified biomass fuel property.