HVAC Tax Credit Update On Air Conditioners & Furnaces

ac and furnace

The U.S. Internal Revenue Service (IRS) has issued further legal guidance on consumer tax credits for residential HVAC purchases.  The document discusses two newly enacted laws, the Energy Improvement and Extension Act of 2008 (EIEA) and the American Recovery and Reinvestment Act of 2009 (ARRA).

EIEA revived the tax credits that were allowed to expire at the end 2007 and added biomass stoves to the list of eligible property.  Enacted several months later, ARRA superseded EIEA and revised the energy efficiency standards and credit calculation methods for eligible products.

Products purchased and installed February 18, 2009—December 31, 2010 (ARRA)

Apart from changes to the qualifying efficiency standards for air conditioners and heat pumps, the levels remain the same.  The credit is equal to 30% of the total installed cost of the unit, not to exceed a cumulative $1500 per taxpayer.  If a qualifying furnace fan is not part of qualifying furnace, only the amount “paid or incurred to install the main air circulating fan” can be eligible for a credit – not the entire furnace itself.  The guidance document describes two methods for a taxpayer to account for what portion of an overall furnace can be attributable to the fan, using math and manufacturer information.  In addition, the document discusses manufacturer certification requirements, penalties for erroneous certifications and effective dates.

Products purchased and installed January 1, 2009—February 17, 2009 (EIEA)

Qualified energy efficient property includes property that was eligible under the previous tax credit program, allowed to expire at the end of 2007.  Also, biomass stoves with thermal efficiency ratings of at least 75 (using the lower heating value) were added.  The eligible credit amount is 30% of the total installed cost of a unit, not to exceed a cumulative $1500 per taxpayer.  Note, air conditioners eligible under the previous tax credit program (15 SEER/12.5 EER) can qualify.

Here's the IRS policy. News is spreading on the incredible savings on energy-saving air conditioning products from these tax credits. Unfortunately, rumors are spreading as well. Don't just take a HVAC contractor's word on the savings potential. Seek qualified tax advice from a Certified Public Accountant on these matters and check here and the IRS website. Tax Credit clarification continues to evolve, when I hear more news you’ll see it here first!

Posted: 6/4/2009 8:05:39 AM by Sam