Federal Tax Credits
American Recovery and Reinvestment Act of 2009 signed by President Obama made significant changes to homeowner tax credits for certain energy-efficient home improvements to help stimulate the economy and conserve energy.
Homeowners who purchase a qualifying heating and air conditioning system or residential water heater are eligible for a tax credit equal to 30% of the total cost, up to a $1500 maximum for the two years 2009 and 2010. Geothermal heat pumps also receive a tax credit up to 30% of the total cost but are not subject to the $1,500 cap.
Every taxpayer’s situation is different. We can’t guarantee tax credits. But Ed’s HVAC Plumbing Electric can help you figure out what equipment qualifies and how it can work for your comfort, health and budget.
Frequently asked questions:
What water heaters and heating and cooling systems qualify?
Homeowners may be able to claim tax credits equal to 30% of the installed costs (up to $1,500) for qualified improvements (see list here) to their primary residence households for 2009 and 2010.
When can the $1,500 tax credit be used?
The new tax credits are retroactive to January 1, 2009, and expire on December 31, 2010. The $1,500 limit is for all improvements made during the two year term, not $1500 each year.
Are per-appliance limits still in effect?
The previous per-appliance limit; $150 for a high efficiency furnace or $300 for a high efficiency central air conditioner or heat pump have been removed. Homeowners may use the entire $1,500 tax credit limit on a single qualifying improvement.
What if the $500 efficiency tax credit was already claimed in 2006 or 2007?
The lifetime limit was removed. Homeowners that previously claimed tax credits in 2006 or 2007 are eligible for the full $1,500 limit.
Expanded Geothermal Tax Credits
Homeowners who install geothermal heat pump systems may be able to claim up to 30% of the installed costs in tax credits in the year the system is placed into service. The $2,000 tax credit limit has been removed. The geothermal tax credit has a longer term, from January 1, 2009 and expires December 31, 2016.
Does the geothermal tax credit apply to new construction?
Yes. The geothermal tax credit is for new and retrofit construction.
Does a heat pump need to meet each of the minimums to qualify or just one?>
Heat pumps must meet each of the minimum standards listed above to qualify for the tax credits.
Does this apply to equipment installed in new homes?
No. The tax credit can only be claimed by taxpayers for improvements to existing homes.
Does this replace the Department of Energy or Energy Star program?
These tax credits are from the same program, but it has been modified and expanded. It is the same program that allowed taxpayers to claim up to $500 in tax credit in 2006 and 2007, and part of 2009. The differences are the tax credit limit is higher and the per-appliance caps have been removed.
Does a tankless water heater qualify?
A tankless water heater with an energy factor (EF) of 0.82 or greater will qualify for the tax credit.
Do ductless mini-splits meeting the HSPF criteria qualify for the tax credit?
Yes, as long as they meet or exceed the minimum qualifications for split air-conditioners (16 SEER and 13 EER) or split heat pumps (8.5 HSPF, 15 SEER, 12.5 EER).
What if the homeowner installs a furnace that meets the 95% AFUE standard but a central air conditioner below the standard? Can they still claim the full $1500?
The homeowners can claim 30% of the final installation costs up to $1,500 associated specifically with the 95% AFUE furnace will qualify for the credit. Should the installation costs associated with the furnace not reach $5,000, 30% of the installation cost can still be claimed and the difference between that amount and the $1,500 cap can be applied to any other qualifying improvements.
Can a small business that operates out of a townhouse and installs residential equipment in a commercial setting claim the credit?
No. The tax credit may only be claimed by taxpayers on their personal income taxes for improvements to their primary residence.
How will a taxpayer claim the credit?
In the past, the IRS has directed taxpayers to use Form 5695, Residential Energy Efficient Property Credit. Taxpayers are not required to file anything more than the form, but they are instructed to keep records of their installation. Ed’s HVAC Plumbing Electric will provide our clients with a Manufacturer Certification for their qualified system. Homeowners should keep the manufacturer certification and receipt for their records. We strive to assure that our client’s new high efficiency system meets IRS standards so you can properly claim your tax credit. Individual taxpayer circumstances may vary. Consult with your tax advisor for final determination of your tax credit.
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