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.
