HVAC Tax Credits in 2009 Stimulus
Here's a summary of important HVAC-related tax credits included in the 2009 stimulus package, along with answers to frequently asked questions. Homeowners may be able to claim tax credits equal to 30% of the installed costs (up to $1,500).
Tax Credits for Consumers:
Home Improvements
Tax credits are now available for home improvements:
- must be "placed in service" from January 1, 2009 through December 31, 2010
- must be for taxpayer's principal residence, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, and small wind energy systems (where second homes qualify)
- $1,500 is the maximum total amount that can be claimed for all products placed in service in 2009 & 2010 for most home improvements, EXCEPT for geothermal heat pumps, solar water heaters, solar panels, fuel cells, and small wind energy systems which are not subject to this cap, and are in effect through 2016
- must have a Manufacturer Certification Statement to qualify
- for record keeping, save your receipts and the Manufacturer Certification Statement
- improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) — use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010
- If you are building a new home, you can qualify for the tax credit for geothermal heat pumps, photovoltaics, solar water heaters, small wind energy systems and fuel cells, but not the tax credits for windows, doors, insulation, roofs, HVAC, or non-solar water heaters.
To learn more about Federal Tax Credits for Energy Efficiency ... click here.
Frequently Asked Questions about the new Tax Credits:
by Charlie McCrudden,
ACCA
Can the 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.
Should I promise the homeowner that they will definitely qualify for the tax credit?
No. Each taxpayer's situation is different. You may not know if the taxpayer has already made other improvements that qualify, or if their tax situation will change by the end of the tax year. But to be safe, you can always say "by installing qualified equipment, the taxpayer may be qualified to claim of 30% of the installed costs (up to a $1,500 limit) in tax credits."
Charlie McCrudden is ACCA director of government relations.
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