As part of the President’s American Recovery and Reinvestment Act of 2009 (ARRA), homeowners, are eligible for Tax Credits.  These Tax Credits can be up to 30% of the installed cost of qualifying new, high efficiency heating and cooling equipment, with a maximum credit of $1500.  Tax credits are available for HVAC improvements made during 2009 and 2010.  Improvements made during 2008 are not eligible.  The credit expires 12/31/10.

Equipment requirements to qualify for tax credits
Split Heat Pumps 15 SEER 12.5 EER 8.5 HSPF	Package Heat Pumps 14 SEER 12 EER	Split A/C 16 SEER 13 EER	Package A/C 14 SEER 12 EER	Natural Gas furnace 95% AFUE
Frequently asked questions about tax credits

Q:  Can the homeowner claim $1500 in tax credits for improvements made in 2009 and again for improvements made in 2010?
A:  No.  Taxpayers may only be eligible for a total of $1500 intax creditsfor improvements in the combined two year period of 2009 – 2010.

Q:  Can the homeowner use the entire $1500 as a credit towards the installation of one appliance?
A: Yes.  A homeowner may use the entire $1500 in tax credits for installing a single appliance, such as a qualifying heat pump, air conditioner, or furnace.  If the homeowner replaces several appliances (i.e: two A/C systems) the maximum credit will still be $1500.

Q:  What happens if the 30% of the installed costs is less than $1500?
A:  The homeowner can “bank” the remaining available tax credit for other qualified improvements.  Any single installation costs more than $5000 will instantly reach the $1500 limit.

Q:  Does the tax credit apply to the cost of equipment, or equipment plus labor?
A:  The tax credit applies to the installed costs of qualified equipment, which includes labor.

Q:  How does the taxpayer claim the credit and recieve their money? 
A:  The IRS has directed taxpayers to use form 5695 version 2009 (expected to be available toward the end of 2009),  Residential Energy Efficient Property Credit.  Taxpayers are not required to file anything more than the form, but are instructed to keep records of their installation.

Q:  What’s the difference between a tax credit and a tax deduction?
A:  As a tax credit applies to a taxpayer’s liability, a tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower bracket.  Tax credits  have a greater benefit to the taxpayer.  With a tax credit, if a taxpayer owes $2000 in taxes, their liability is reduced to $500.  If they owe nothing, they can expect a $1500 refund.

Q:  What if the homeowner already claimed $500 in tax credits in 2006 or 2007?
A:   The “lifetime caps” that used to be in place have been removed.  Any previous claims do not count against the current $1500 limit.

Q:  Can the homeowner claim the credit for improvements to a second home?
A:  No.  The tax credit is only available for improvements to the taxpayers primary residence. 

Q:  Can a small business that operates out of a townhouse and installs residential equipment in a commercial setting claim the credit?
A:  No.  The tax credit may only be claimed by taxpayers on their personal income taxes for improvments to their primary residence.

Q:  What other types of energy efficiency improvemnets qualify for the tax credits?
A:  Making qualified improvements to: windows and doors including skylights, storm windows and storm doors, roofing(metal and asphalt) and insulation.  All these improvements qualify, but the homeowner may only claim $1500 in total for any improvements.