How has the new Stimulus bill affected the tax credits for energy efficient home improvements?
On February 17, 2009, President Obama signed a stimulus bill (The American Recovery and Reinvestment Act of 2009) that made some significant changes to the energy efficiency tax credits. The highlights are:
- The tax credits that were previously effective for 2009, have been extended to 2010 as well.
- The tax credit has been raised from 10% to 30%.
- The tax credits that were for a specific dollar amount (ex $300 for a Central A/C), have been converted to 30% of the cost.
- The maximum credit has been raised from $500 to $1500 for the two years (2009–2010). However, some improvements such as geothermal heat pumps, solar water heaters, and solar panels are not subject to the $1,500 maximum.
- The $200 cap on windows has been removed.
UPDATED February 24th, 2009
With 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.
- Furnace to qualify >= 95% AFUE
- Boiler to qualify >= 90% AFUE
- Air Conditioner to qualify >= 16 SEER + 13 EER
- Heat Pump to qualify >= 8.5 HSPF + 15 SEER + 12.5 EER
- Water Heater energy factor >=.82 (tankless)
Please ask for details on qualifying equipment.
- The new 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 $1500 each year.
- Per-Appliance Caps Removed - Homeowners may use the entire $1,500 tax credit limit on a single qualifying improvement. The previous per-appliance caps that limited the homeowner to just $150 for a high efficiency furnace or $300 for a high efficiency central air conditioner or heat pump have been removed.
- Lifetime Limit Removed - Homeowners that previously claimed tax credits in 2006 or 2007 are eligible for the full $1,500 limit.
- Expanded Geothermal Tax Credits - 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. The $2,000 tax credit limit has been removed. The geothermal tax credit has a longer term, from January 1, 2009 and expires December 31, 2016.
- Consumers should be aware that the $1,500 limit applies to many types of energy efficient home improvements, including windows and doors, roofing shingles, and insulation. You can use the $1500 on just HVAC improvements or on a combination of above home improvements.
Residential Tax Credit Details:
For qualified improvements, homeowners may be able to claim tax credits equal to 30% of the installed costs (up to $1,500).
ABOUT THE TAX CREDIT
How does the new economic stimulus affect me?
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.What’s the difference between a tax credit and a tax deduction?
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.How do I claim the 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.What is the amount of the new tax credit?
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.What is the time frame for the new tax credits?
The new 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.Can I claim $1,500 in tax credits for improvements made in 2009 and again for improvements in 2010?
No. 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.What happens if the 30% of the installed costs is less than $1,500?
The homeowner can “bank” the remaining available tax credit for other qualified improvements. Any single installation that costs more than $5000 will instantly reach the $1,500 limit.Does the tax credit apply to the cost of the equipment or equipment plus labor?
Yes, the credit applies to the installed costs of the qualified equipment, which includes labor.QUALIFYING FOR THE TAX CREDIT
What can I do take advantage of the new energy tax incentives?
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.Are the tax credits different for geothermal heat pumps?
Yes, 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.What if I previously claimed tax credits in 2006 or 2007?
Homeowners that previously claimed tax credits in 2006 or 2007 are eligible to claim the full $1,500 limit.
How do I know which specific equipment or improvements qualify for the tax credits?
There are a wide range of products available that qualify for the full tax credits for a FREE consultation to review all available options call me now at 636-464-HVAC (4822).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.Give me a call today to schedule a free estimate! (636)464-4822
**Please note, not all ENERGY STAR qualified homes and products qualify for a tax credit. These tax credits are available for a number of products at the highest efficiency levels, which typically cost much more than standard products. If, for whatever reason, you decide not to purchase a product covered by the tax credit, you may still consider purchasing an ENERGY STAR product. ENERGY STAR distinguishes energy efficient products which, although they may cost more to purchase than standard models, will pay you back in lower energy bills within a reasonable amount of time, without a tax credit.
Read all the details @ www.energystar.gov
What is a Tax Credit? - You don’t receive an income tax credit when you buy the product, like an instant rebate. You claim the credit on your federal income tax form at the end of the year. The credit then increases the tax refund you receive or decreases the amount you have to pay.