ABOUT THE TAX CREDIT

How does the new economic stimulus affect me?

The American Recovery and Reinvestment Act of 2009 (ARRA) combines spending and tax incentives designed to invest in road and energy infrastructure, and increasing energy efficiency and performance of America’s homes and buildings. The law makes important changes to existing tax credits for qualified home improvements of higher efficiency heating, air conditioning and water heating equipment.

 

What’s the difference between a tax credit and a tax deduction?

A tax credit applies against the taxpayers’ liability.  A tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower tax bracket.

 

How do I claim the credit?

The IRS has directed taxpayers to use Form 5695 to claim the credit. Taxpayers are also instructed to keep complete records of their installation and home improvements.

 

What is the amount of the new tax credit?

For the qualified home improvements, homeowners may be able to claim tax credits equal to 30% of the installed costs, up to a total of $1,500.

 

What is the time frame for the new tax credits?

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 $1,500 each year.

 

Can I claim $1,500 in tax credits for improvements made in 2009 and again for improvements in 2010?

No.  Homeowners may only be eligible for a total of $1,500 in tax credits for improvements made in the combined two year period of 2009 and 2010.

 

What happens if the 30% of the installed costs is less than $1,500?

The homeowner can “bank” the remaining available tax credit for other qualified improvements. Any single installation that costs more than $5000 will instantly reach the $1,500 limit.

 

Does the tax credit apply to the cost of the equipment or equipment plus labor?

Yes, the credit applies to the installed costs of the qualified equipment, which includes labor.
 

 

QUALIFYING FOR THE TAX CREDIT

What can I do take advantage of the new energy tax incentives?

Homeowners can receive a substantial tax credit for home efficiency improvements on new high efficient air conditioners, heat pumps, furnaces, boilers and water heaters.  Additionally, new high efficiency windows and additional home insulation qualify.

 

Are the tax credits different for geothermal heat pumps?

Yes, 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.  However, there is no dollar limit to the credit on geothermal heat pumps. The geothermal tax credit also has a longer term, from January 1, 2009 and expires December 31, 2016.

 

What if I install a furnace that meets the 95% AFUE standard, but with a central air conditioner below the standard? Can I still claim the full $1,500?

Homeowners can claim 30% of the final installation costs up to $1,500 associated specifically with the 95% AFUE furnace.  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 I use the entire $1,500 tax credit on a single qualifying home improvement?

Yes. Previous per-appliance caps that limited homeowners to just $150 for a high efficiency furnace or $300 for a high efficiency central air conditioner or heat pump have been removed.

 

What if I previously claimed tax credits in 2006 or 2007?

Homeowners that previously claimed tax credits in 2006 or 2007 are eligible to claim the full $1,500 limit.

How do I know which specific equipment or improvements qualify for the tax credits?

There are a wide range of products available that qualify for the full tax credits.  Schedule a free appointment with one of our Energy Advisors for more details.

 

Can I claim the credit for improvements to a second home?

No. The tax credit is only available for improvement to the taxpayer’s primary residence.

Can modular or mobile homeowners qualify?

Yes.  As long as the improvements meet the qualifying criteria and the homeowner’s primary residence they may claim the tax credit.

 

The American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law on February 16, 2009 by U.S. President Barack Obama, opening the door for heating, air conditioning and indoor air quality customers to receive expanded tax credits. The tax credits apply to the installed costs of qualifying high-efficiency products and home efficiency improvements.

The tax credit is equal to 30% of the installed cost of qualifying heating and cooling improvements, up to a cumulative amount of $1,500 during the two year incentive term. The credit's term is retroactive to the beginning of the year 2009, from January 1, 2009 to the expiration date of December 31, 2010. All previous 'caps' on the credits have been removed. Consumers who previously claimed the same tax credits in prior years may also claim the 30% tax credit (up to $1,500) included in the Act.

Qualifying geothermal products are not subject the $1,500 credit limit. A full 30% credit may be taken on the entire cost of the geothermal improvement. In addition, geothermal products have a longer credit term, expiring December 31, 2016.

 

What improvements qualify:

Qualifying improvements include energy-saving heating & cooling equipment, indoor air quality components, boilers, water heaters, windows, doors, skylights, roofing, insulation and solar devices. Energy-efficiency limits for improvements are detailed below. The full $1,500 tax credit can be applied to a single purchase or a combination of appliances or energy improvements.

 

How to get the credit:

Use IRS Form 5695 to file for the credit. It is strongly recommended that you consult with a qualified CPA and keep all records and receipts of purchases.

 

Limitations of the credit:

The tax credit is only available on the taxpayer's primary residence and can only be claimed on their personal income taxes.

 

Selected Equipment	Current Requirement
Split Heat Pumps	15 SEER
	12.5 EER
	8.5 HSPF
Package Heat Pumps	14 SEER
	12 EER
	8 HSPF
Central Air Conditioners	16 SEER
	13 EER
Gas Package System	14 SEER
	12 EER
Gas Furnace	95% AFUE