New And Renewed Tax Credits Now Help U.S. Homeowners Save Hundreds

UPDATED - 2.16.09

The American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law on February 16, 2009 by U.S. President Barack Obama, opening the door for heating, air conditioning and indoor air quality customers to receive expanded tax credits. The tax credits apply to the installed costs of qualifying high-efficiency products and home efficiency improvements.

The tax credit is equal to 30% of the installed cost of qualifying heating and cooling improvements, up to a cumulative amount of $1,500 during the two year incentive term. The credit's term is retroactive to the beginning of the year 2009, from January 1, 2009 to the expiration date of December 31, 2010. All previous 'caps' on the credits have been removed. Consumers who previously claimed the same tax credits in prior years may also claim the 30% tax credit (up to $1,500) included in the Act.

Qualifying geothermal products are not subject the $1,500 credit limit. A full 30% credit may be taken on the entire cost of the geothermal improvement. In addition, geothermal products have a longer credit term, expiring December 31, 2016.

What improvements qualify:

Qualifying improvements include energy-saving heating & cooling equipment, indoor air quality components, boilers, water heaters, windows, doors, skylights, roofing, insulation and solar devices. Energy-efficiency limits for improvements are detailed below. The full $1,500 tax credit can be applied to a single purchase or a combination of appliances or energy improvements.

How to get the credit:

Use IRS Form 5695 to file for the credit. It is strongly recommended that you consult with a qualified CPA and keep all records and receipts of purchases.

Limitations of the credit:

The tax credit is only available on the taxpayer's primary residence and can only be claimed on their personal income taxes.

Equipment	Previous Law	Current Law
Electric Heat Pump	(No Distinction)	Split Heat Pumps	Package Heat Pumps
	15 SEER	15 SEER	14 SEER
	13 EER	12.5 EER	12 EER
	9 HSPF	8.5 HSPF	8 HSPF
Central Air Conditioners	Split System
	15 SEER	16 SEER
	12.5 EER	13 EER
	Package System
	14 SEER	14 SEER
	12 EER	12 EER
Water Heaters	.80 Energy Factor	.82 Energy Factor
	90% Thermal Efficiency	90% Thermal Efficiency
Wood Stoves	75% Thermal Efficiency	"75% Thermal Efficiency, as measured using a lower heating value."
Natural Gas Furnace	95% AFUE	95% AFUE
Natural Gas Hot Water Boiler	95% AFUE	90% AFUE
Propane Furnace	95% AFUE	95% AFUE
Propane Hot Water Boiler	95% AFUE	90% AFUE
Oil Furnace	95% AFUE	90% AFUE
Oil Hot Water Boiler	95% AFUE	90% AFUE

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There are several provisions of the revised Emergency Economic Stabilization Act of 2008 (EESA), just signed into law, that could help you save hundreds of  dollars in energy efficiency through tax rebates. In today's economic climate it's a great time to take advantage of every opportunity available to be green, and save green!

Economic policies are changing rapidly these days. I'll keep you posted whenever I find new ways for you to save more energy and money in your home.

Credit for Energy-Efficiency Improvements to Existing Homes

The Energy Policy Act of 2005 created a tax credit for homeowners who installed higher efficiency HVAC equipment in tax years 2006 and 2007.  EESA extends the tax credit for energy-efficient purchases in 2009, and adds energy-efficient biomass fuel stoves – such as wood pellet stoves – as a new class of eligible energy efficient property.  Taxpayers that have already claimed the maximum $500 in tax credits in 2006 or 2007 are not eligible to claim further credits in 2009.

• Furnace ($150) must have at least a 95% AFUE
• Air handler ($50) must utilize less than 2% of a furnace’s total energy consumption
• Central air conditioner ($300) must have a SEER of at least 15 and an EER of at least 13
• Electric heat pump ($300) must have at least an HSPF of 9, SEER of 15, and EER of 13
• Biomass fuel stove ($300) must have a thermal efficiency rating of 75% or greater

Residential Geothermal Heat Pump Tax Credit

The Energy Policy Act of 2005 contained a $300 tax credit for homeowners who installed geothermal heat pumps.  EESA creates a new $2,000 tax credit for home owners who install a geothermal heat pump – not subject to the $500 cap established for the products referenced above.  EESA also qualifies geothermal heat pumps for a $6,667 tax credit when used on a jointly occupied dwelling unit, condominium, or for owners of cooperative housing.  In addition, the tax credit can be used to offset any Alternative Minimum Tax liability. The new credit is retroactive for 2008 and continues through 2016.

• Geothermal heat pump ($2,000) must meet Energy Star requirements in effect at the time that the expenditure for such equipment is made – credit amount is 30% of the total expenditure, capped at $2,000

Residential Photovoltaic Property Tax Credit

The Energy Policy Act of 2005 created a tax credit for homeowners who installed photovoltaic (solar energy) property for their residence.  The law extends the credit for residential photovoltaic property through 2016 and removes the credit cap (currently $2,000) for solar electric investments. 

• Photovoltaic property (30% of total expenditure) must use solar energy to generate electricity for a residence, and must meet applicable fire and electrical code requirements

Homebuilder Credit for Energy-Efficiency Improvements to New Homes

Under current law, homebuilders receive a credit for the construction of energy-efficient new homes that achieve a 30% or 50% reduction in heating and cooling energy consumption relative to a comparable dwelling. The credit equals $1,000 for homes meeting a 30% efficiency standard, $2,000 for homes meeting a 50% standard. EESA extends the new energy efficient home tax credit through 2009.

Energy-Efficient Buildings Deduction

Current law allows taxpayers to deduct the cost of energy-efficient property installed in commercial buildings. The amount deductible is up to $1.80 per square foot of building floor area for buildings achieving a 50% energy savings target. The energy savings must be accomplished through energy and power cost reductions for the building’s heating, cooling, ventilation, hot water, and interior lighting systems.  EESA extends the energy efficient commercial buildings deduction for five years – through 2013.

15 Year Depreciation for Restaurant, Retail, and Other Qualified Property

The American Jobs Creation Act of 2004 changed the depreciation period for qualified improvements of leasehold and restaurant property from 39 years – to 15 years. The provision applied to improvements that included new HVAC systems or refrigerators, and expired December 31, 2007.  EESA reinstates the allowance for the accelerated depreciation retroactively for 2008 and goes through 2009. It also expands it to include leasehold improvements in buildings and restaurants less than three years old, as well as including retail space more than three years old on the eligible property list.

Of course, I'm a technician, not a tax adviser. So please be sure to check with a qualified CPA to see what programs are available to you. And if you need a little help understanding AFUE and SEER, see our handy glossary.

Upgrading your heating and air conditioning equipment is really easy, and we have great financing and discounts through November 14th. A new system consultation is completely free, so just call a location near you to learn what system options meet your needs.

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