Go Green – $1500 HVAC Tax Credit

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Go Green – $1500 HVAC Tax Credit

*Update: 2011 HVAC Energy Tax Credits can be viewed here

With passage of the American Recovery and Reinvestment Act of 2009, consumers can upgrade to more energy-efficient HVAC equipment and save on their energy bills now, and also save on their taxes next year. The new law makes important changes to existing tax incentives for homeowners who make qualified improvements of higher efficiency HVAC equipment.

(For more information on how higher efficiency equipment can save you more money, please see our previous post here.)

Houston Metro Residents should contact us about applying this tax credit to new HVAC equipment. Outside Houston contact your local HVAC contractors.

Residential Tax Credit Details

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

  • Furnace to qualify 95% AFUE
  • Boiler to qualify 90% AFUE
  • A/C to qualify 16 SEER + 13 EER
  • Heat Pump same as A/C plus HSPF 9
  • Water Heater energy factor .8 (tankless)

Please ask your comfort adviser for details on qualifying equipment.

  • 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.
  • Per-Appliance Caps Removed – Homeowners may use the entire $1,500 tax credit limit on a single qualifying improvement. The previous per-appliance caps that limited the homeowner to just $150 for a high efficiency furnace or $300 for a high efficiency central air conditioner or heat pump have been removed.
  • Lifetime Limit 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.
  • Consumers should be aware that the $1,500 limit applies to many types of energy efficient home improvements, including windows and doors, roofing shingles, and insulation. You can use the $1500 on just HVAC improvements or on a combination of above home improvements.

Frequently Asked Questions About the New Tax Credits

Can a homeowner claim $1500 in tax credits for improvements made in 2009 and again for improvements made in 2010?
No. Taxpayers may only be eligible for a total of $1500 in tax credits for improvements made in the combined two year period of 2009 and 2010.

Can a homeowner use the entire $1500 limit as a credit toward the installation of one appliance?
Yes. A homeowner may use the entire $1500 in tax credits for installing a single appliance, such as a qualified furnace, air conditioner, heat pump, or hot water heater.

What happens if the 30% of the installed costs is less than $1500?
The homeowner can “bank” the the remaining available tax credit for other qualified improvements. Any single installation that costs more than $5000 will instantly reach the $1500 limit.

Does the tax credit apply to the cost of the equipment or equipment plus labor?
The tax credit applies to the installed costs of the qualified equipment, which includes labor.

How will a taxpayer claim the credit and receive their money?
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 are instructed to keep records of their installation.

What’s the difference between a tax credit and a tax deduction?
As 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. Tax credits have a greater benefit to a taxpayer.
With a tax credit, if the taxpayer owes $2000, in taxes, their liability is reduced to $500. If they owe nothing, they can expect a $1500 refund.

What if the homeowners already claimed $500 in tax credits in 2006 or 2007?
The “lifetime caps” that used to be in place have been removed. Any previous claims do not count against the current $1500 tax credit limit.

Can a homeowner 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 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.

What other types of energy efficiency improvements qualify for the tax credits?
Homeowners may be able to qualify for the tax credits if they make qualified improvements to: windows and doors including skylights, storm windows and storm doors; roofing including metal and asphalt roofs; and insulation. All of these improvements qualify, but homeowner may only claim $1500 in total for any improvements.

Will every homeowner definitely qualify for the tax credit?
No. Each taxpayer’s situation is different. Please consult with a tax professional if you have questions regarding your tax situation in regards to these new credits.

It’s hard to find good news for your wallet these days, but these new tax credit changes can help you keep your cool in terms of both comfort and savings!

By |2018-11-30T15:19:55+00:00February 18th, 2009||36 Comments

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36 Comments

  1. Yol 08/21/2009 at 10:58 am - Reply

    Can a homeowner claim $1500 in tax credits for improvements made in 2009 for a Guardian 5 Ton HVAC?

  2. Jason Stom 08/21/2009 at 11:11 am - Reply

    Yes, you can. The only stipulation is the system has to meet the qualifications listed above and have a ARI certificate number proving it.

  3. brian 08/21/2009 at 4:14 pm - Reply

    where can I find the income limit to use this? ie…if I make over $X, can I still use this? What is $X?

  4. Jason Stom 08/21/2009 at 4:37 pm - Reply

    There is no upper or lower limit on income for the energy efficient tax credits. Source: “

  5. william brooks 08/31/2009 at 11:57 am - Reply

    can you use the tax credit on just an air handler?

  6. Jason Stom 08/31/2009 at 12:17 pm - Reply

    William, you will not be able to get the credit on just an air handler. Air handlers alone can’t achieve the proper energy efficiency without the matched outside condensing unit. There has to be a combined efficiency of 16 SEER + 13 EER. If your matching to a heat pump, it also has to have a efficiency rating of HSPF 9.

  7. Daniel P. Carter 08/31/2009 at 9:12 pm - Reply

    Does a Payne AC Model PA13 w/ a SEER of 13.0 qualify for the tax credit? Thanks.

  8. Jason Stom 08/31/2009 at 9:16 pm - Reply

    Daniel, Unfortunately it does not qualify. That is a 13 SEER unit.

    To qualify, it needs to be 16 SEER + 13 EER

  9. Chuck Gaudio 10/22/2009 at 9:54 pm - Reply

    Hi, I’m looking at IRS Form 5695 and there are lines for solar electric, solar water heating, fuel cell, wind energy, and geothermal. Nothing for an a/c, no mention of SEER. What gives? Is this the right form?
    Thanks!
    -Chuck

    • Jason Stom 10/22/2009 at 10:15 pm - Reply

      Hi Chuck,

      I would not be qualified to answer any questions about the particular form: IRS 5695. I would advise anyone to seek the counsel of a tax professional or your accountant. The form 5695 is the correct form and utilizes the tax credit you are asking about.

  10. Tanya 12/30/2009 at 6:52 pm - Reply

    We installed our new energy efficient AC unit in July 2008 but finshed paying for it in May 2009. Would we still qualify for the tax credit?

    • Jason Stom 12/31/2009 at 1:00 pm - Reply

      No, unfortunately it needs to be installed in 2009 or 2010.

  11. bslusaw@verizon.net 01/09/2010 at 11:14 am - Reply

    If I instal the ac and heat pump before march 2010 can I claim it on my 2009 return?

    • Jason Stom 01/26/2010 at 10:52 pm - Reply

      You have to install it in the same year you will file for the tax credit.

  12. Billy 01/20/2010 at 7:59 pm - Reply

    Hi Jason

    I am going to claim $1500 tax credit for energy efficient windows at my primary residence in 2009 . Can I claim another $1500 tax credit in 2010 for energy efficient Roof Top HVAC unit I am going to instal shortly. My tax professional is telling me that I can. Can you please verify and let me know.Thanx!!!

    Billy

    • Jason Stom 01/26/2010 at 10:57 pm - Reply

      Billy, I would trust in you tax professional, but I have only heard of one way of getting the $1500 credit twice: you have to be married and file separately. Although the advantages of filing joint would offset the advantages of the two tax credits filed, so I am not sure it would be worth it. Again, I would advice close counsel with your tax professional.

  13. mary c 01/24/2010 at 8:12 pm - Reply

    If you file your taxes online do you have to mail in your form 5695?

    • Jason Stom 01/26/2010 at 10:50 pm - Reply

      Hi Mary, you will need to seek the advice of a tax professional.

  14. Name 01/26/2010 at 9:30 pm - Reply

    is there a income limit for getting the $1500 tax credit

  15. Tina 01/29/2010 at 12:22 pm - Reply

    I am not too smart when it comes to this kinda stuff but we just replaced a 19yr old furnace…how do i know if the new one qualifies…what do i need to look for? (In layman’s terms if possible) thanks!

    • Jason Stom 01/29/2010 at 1:04 pm - Reply

      Hi Tina,

      The easiest way is for your HVAC contractor to help show you the options. If they are not willing to show you the models or units that qualifies, I would move on to one that will. You can verify any model through ARI Furnace Directory. Just select the option at the bottom that says “Eligible for Federal Tax Credit”

      What you’re looking for on a Natural Gas or Propane Furnace is AFUE ≥ 95% (means 95% of the heat stays in your home. The other 5% goes out the flue). For oil furnaces AFUE ≥ 90. If you meet those requirements and had the correct model installed you are eligible for a Tax Credit: 30% of cost up to $1,500 (New construction and rentals do not qualify)

  16. Diego 02/05/2010 at 12:46 pm - Reply

    I am looking to replace my furnace and central air. The contractor informed me that as long as the furnace meets the engergy star 95% efficiency rating requirement, the central a/c unit does not have to meet the 16 SEER rating. He states that as long as one of them meets the requirement, the entire cost of the furnace and a/c will qualify for the tax credit. I have not seen this anywhere. Is this correct?

    • Jason Stom 02/05/2010 at 1:05 pm - Reply

      Diego,

      Your contractor is correct. He is using the cost & efficiency of the furnace to achieve the tax credit. (30% of cost up to $1,500). So if your furnace installation is $5000 or more you can achieve the total $1500 tax credit. The invoice will need reflect the furnace installation & a/c installation charges separated.

      In northern climates this is more common because air conditioning efficiency is not as important due to lack of run time and lower utility rates. However, heating is much more of a demand because of climate and gas/oil is much more expensive. Down here in the south, air conditioning takes much more of a priority because of climate and high utility costs.

  17. Diego 02/05/2010 at 2:03 pm - Reply

    Jason,thanks for the reply. The furnace only comes to $3000. The Central would be an additional $2300 to bump it over $5000. It seems like I would only get 30% of the the $2300. Am I over analyzing this?

    • Jason Stom 02/05/2010 at 2:13 pm - Reply

      Diego,
      To get the entire $1500 the furnace install has to reflect $5000 on the invoice. At $3000 your credit will only be $900.

  18. Lee 02/09/2010 at 12:01 am - Reply

    We have a home warranty with a co-pay of $60. This year, we had to have our ac unit replaced and all we had to pay was the co-pay. Can we still claim the ac value ($3200, I think) on our taxes, even though we didn’t actually “pay” that for the new ac unit?

    • Jason Stom 02/09/2010 at 12:40 pm - Reply

      Hi Lee,

      You would not be eligible for the tax credit because you did not pay out of your pocket for the replacement. Also, just installing any air conditioner does not allow for the tax credit. You must install a ARI approved, high efficient air conditioning with a rating of 16 SEER + 13 EER.

      I can almost guarantee you that NO home warranty company would have installed a high efficient HVAC unit. They are nothing more than a insurance company and will do anything to pay as little for a claim (repair/replacement).

  19. Marc 02/17/2010 at 7:57 pm - Reply

    Hi Jason, great article, thank you! You mention that new construction is not eligible for the tax credit. Is this the case even if we paid extra to have the AC unit installed? In other words, it was not part of the original plan and we paid the builder an additional sum for it, however it was installed prior to the closing.

    • Jason Stom 02/17/2010 at 8:35 pm - Reply

      Hi Marc,
      This is a excellent question. I would have to say that you will definitely want to check with your tax professional on this one. I would assume the answer will be no because it was done prior to closing. But in my opinion you should be allowed the credit because you chose to upgrade and make it a high efficient system. Also kudos to you for telling the builder what you want in your HVAC system. A lot of folks just sign the contract and let the builder put in what ever they want with a sub-par installation causing all kinds of problems in the future.

  20. JOHN 02/20/2010 at 12:57 am - Reply

    I am in the process of hiring a contractor to install a new replacement hvac unit in my home. I was under the impression that the SEER rating should be at least 15 and the EER s/b 13. I read here that it must be a min of 16 SEER. What gives?

    thanks

    JOHN

    • Jason Stom 02/20/2010 at 12:15 pm - Reply

      Hi John

      It can get confusing, but the guidelines are outlined by the government. The full details can be seen here. Your contractor should give you all the information before you purchase. If the equipment is not certified by the manufacture/ARI, you will not be eligible for the tax credit. This step is important in case you are audited.

  21. Linda 02/23/2010 at 2:20 pm - Reply

    I am on fixed income and I had to have a new ac combinstion heat pump unit istalled. I got the unit that was with the certificate to get the tax credit. The cost was $5786.00 this uncludes installation. When my taxes were filled out. I was told that I didn’t qualify for the rebate. Because I got back all I had paid in. Does this still qualify me for the tax rebate. I had worked a little part time.

    • Jason Stom 02/23/2010 at 8:22 pm - Reply

      Hi Linda,
      Unfortunately, I wouldn’t be qualified to answer your question as I don’t know the details of your situation. I would trust in your tax professional to find the right answer for your specific question.

  22. Anonymous 02/23/2010 at 8:11 pm - Reply

    This month we had installed a furnace. Can we put that on our 2009 taxes.
    Nancy

    • Jason Stom 02/23/2010 at 8:14 pm - Reply

      Not for year 2009 taxes, but your still in luck. The tax credit goes through the end of 2010. You will be able to submit for your 2010 taxes

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