Updated 2010 HVAC Tax Credits

The government is eliminating the per-appliance cap on the breaks it gives for energy-efficient home improvements.

Posted by Sirena Rubinoff | Feb 25, 2010
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There's good news this year for America's growing crowd of environmentally conscious patrons: You can actually get tax credits for purchasing green electrical appliances! President Obama recently signed into law a revised version of the American Recovery and Reinvestment Tax Act of 2009. The modifications will increase the tax credits that American citizens can receive when buying approved energy-efficient products. The bill has widespread significance, but we will focus on the heating, ventilating and air conditioning (or HVAC) stimuli that are most important to homeowners.

What is the Law's Purpose?

The American Recovery and Reinvestment Act was created to stimulate the economy by encouraging the growth of our nation's infrastructure. Part of that stimulus includes tax incentives for Americans who invest in energy-efficient appliances for their homes and businesses.

What's Covered by 2010 HVAC Credits?

Energy-efficient air conditioners, furnaces, boilers, hot water heaters and heat pumps could end up giving you $1,500 back in tax credits. How does it work? Homeowners may now claim back 30% of the cost -- up to a cumulative $1,500 -- of recently installed energy-efficient appliances in their primary residences. The new bill allows taxpayers to claim credits for installation fees that occur between January 1, 2009 and December 31, 2010.

What's Different?

The previous version of this bill had a cap that limited tax rebates to $150 per appliance. The revised version of the stimulus bill does not have a per-appliance cap. This means that a homeowner could choose to install a single new energy-efficient appliance that costs $5,000 or more and then use the entire 30% or $1,500 tax credit on that single approved item.

Geothermal Heat Pumps

These kinds of specified heat pumps have slightly different rules: You can get more tax credits for them, and you have a longer amount of time to do so. The 30% tax credit on purchase and installation fees still applies; however, there is no dollar limit to the credits that homeowners can collect on the installation of their geothermal heating systems. Also, the term of application lasts from January 1, 2009 until December 31, 2016.

How Can I Claim My Credits?

First, you'll need to confirm that your appliance installation meets government-set standards for energy efficiency. Then, you'll file a Form 5695 for Residential Energy Efficient Property Credit. Once approved, the IRS will credit your tax account up to $1,500. (This means that if you owed $2,000 in taxes before your $1,500 of HVAC credits were accounted for, then you would only owe $500 afterward.)

Other Qualifying Energy-Efficient Improvements

The stimulus bill also covers approved improvements on windows, doors, skylights, roofing and insulation.

Be sure to check with your accountant for any last-minute updates or clarifications to the 2010 HVAC tax credits before submitting your forms.

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