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Tax Rebates
With the 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.
More information can be obtained directly from the EnergyStar website, http://www.energystar.gov/
Frequently Asked Questions:
Q1. Can the homeowner claim $1500 in tax credits for improvements made in 2009 and again for improvements made in 2010?
Answer: No. Taxpayers will be eligible only for a total of $1500 in tax credits for qualifying improvements made in the combined two year period of 2009 and 2010.
Q2. Can a homeowner use the entire $1500 limit as a credit toward the installation of one appliance?
Answer: Yes. A homeowner may use the entire $1500 in tax credits for installing a single appliance, such as a qualified furnace, air conditioner, or heat pump system as long as the total cost of the appliance is $5000 or more. The legislation limits the tax credit to 30% of total cost with a $1500 cap.
Q3. What happens if the 30% of the installed costs is less than $1500?
Answer: The homeowner can use the remaining available tax credit for other qualified improvements in 2009 or 2010. Any single installation of a qualifying appliance that costs less than $5000 will allow the homeowner to invest in additional energy saving appliances or upgrades and still receive a tax credit (up to a $1500 combined maximum).
Q4. Does the tax credit apply to the cost of the equipment or equipment plus labor?
Answer: The tax credit applies to the installed costs of the qualified equipment, which includes labor.
Q5. Do any manufacturers offer a full line of air conditioners and coils that meet the tax credit guidelines?
Answer: According to the AHRI directory, no HVAC manufacturer has a full line of split system air conditioners + coils + variable speed furnaces that meet the tax credit guidelines of 16 SEER and 13 EER. However, several manufacturers have full product lines that meet the tax credit guidelines with 3rd party coils. The AHRI directory can be found at www.ahrinet.org.
Q6. How will a taxpayer claim the credit and receive their money?
Answer: The tax credit applies as a direct reduction of taxes owed.In the past, the IRS has directed taxpayers to use Form 5695, Residential Energy Efficient Property Credit. It is expected that the IRS will produce new rules related to the recently enacted stimulus legislation giving taxpayers further guidance on claiming tax credits.
Q7. Where can a homeowner or dealer find a list of qualifying systems?
Answer: www.ahrinet.org
Q8. What’s the difference between a tax credit and a tax deduction?
Answer: A tax credit applies against the taxpayer’s obligation for taxes. A tax deduction applies against a taxpayer’s income, lowering the adjusted gross income. Tax credits have a greater benefit to a taxpayer. For example, if the taxpayer owes $2000 in taxes, a $1500 tax credit reduces the obligation to $500.
Q9. What if the homeowner already claimed $500 in tax credits in 2006 or 2007?
Answer: The “lifetime caps” that used to be in place have been removed. Previous claims do not count against the current $1500 tax credit limit.
Q10. Can a homeowner claim the credit for improvements to a second home?
Answer: No. The tax credit is available for the taxpayer’s primary residence only.
Q11. Can dealers tell homeowners they will receive a $1500 tax credit if they purchase a qualifying system?
Answer: Dealers can tell homeowners what products and systems qualify for the tax credit and the qualifying amount; however, dealers don’t know what other qualifying products the homeowner may purchase before they file their taxes. The safest strategy for dealers is to share the following chart with homeowners, which is taken from the Energy Star website. This chart shows which HVAC products qualify and the qualifying tax credit amount. Ultimately, dealers should recommend homeowners consult a tax advisor to completely understand how the tax credit may apply to them.