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How To Claim Federal Tax Credits For New HVAC Equipment

help with taxesIt's a bit cumbersome to decipher The American Recovery and Reinvestment Act of 2009, so I thought we'd take some time on the topic as it relates to heating, air conditioning, air quality and plumbing. I hope this information helps you to make the best decision regarding your purchase of energy-efficient home improvements and how they may be applicable for federal tax credits. This is the last year to take advantage of Federal Tax Credits of up to $1,500, making this year a great time to upgrade your old, inefficient heating and air conditioning system.

About the Federal Tax Credit

The American Recovery and Reinvestment Act of 2009 (ARRA) combines spending and tax incentives designed to invest in road and energy infrastructure, and increasing energy efficiency and performance of America’s homes and buildings. The law makes important changes to existing tax credits for qualified home improvements of higher efficiency heating, air conditioning and water heating equipment. (See the latest ARRA policy updates here.)

How to claim the federal tax credit

The IRS has directed taxpayers to use Form 5695 to claim the credit. Taxpayers are also instructed to keep complete records of their installation and home improvements.

For the qualified home improvements, homeowners may be able to claim tax credits equal to 30% of the installed costs, up to a total of $1,500. The tax credits are retroactive to January 1, 2009, and expire on December 31, 2010. The $1,500 limit is for all improvements made during the two year term, not $1,500 each year. Homeowners may only be eligible for a total of $1,500 in tax credits for improvements made in the combined two year period of 2009 and 2010.

Qualifying Home Improvements

tax calculator

Homeowners can receive a substantial tax credit for home efficiency improvements on new high efficient air conditioners, heat pumps, furnaces, boilers and water heaters.  Additionally, new high efficiency windows and additional home insulation qualify. Schedule a free appointment for a FREE consultation with a Service Experts Comfort Advisor to review all available options (choose New/Replacement Equipment Estimate for your Request Type), or call Service Experts now at 1-888-HEATCOOL. (HOT TIP: Enter SAM in the promo code field to receive a complimentary $5 gourmet coffee card.)

What about geothermal heat pumps?

Homeowners who install geothermal heat pump systems may be able to claim up to 30% of the installed costs in tax credits in the year the system is placed into service.  However, there is no dollar limit to the credit on geothermal heat pumps. The geothermal tax credit also has a longer term, from January 1, 2009 and expires December 31, 2016.

What if I install a furnace that meets the 95% AFUE standard, but with a central air conditioner below the standard? Can I still claim the full $1,500?

Homeowners can claim 30% of the final installation costs up to $1,500 associated specifically with the 95% AFUE furnace.  Should the installation costs associated with the furnace not reach $5,000, 30% of the installation cost can still be claimed and the difference between that amount and the $1,500 cap can be applied to any other qualifying improvements.

Can I use the entire $1,500 tax credit on a single qualifying home improvement?

Yes. Previous per-appliance caps that limited homeowners to just $150 for a high efficiency furnace or $300 for a high efficiency central air conditioner or heat pump have been removed.


Can I 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 modular or mobile homeowners qualify?

Yes.  As long as the improvements meet the qualifying criteria and the homeowner’s primary residence they may claim the tax credit.

See more Tax Credit Frequently Asked Questions here.

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