Tax Credits for Homeowners
Part of the tax extender bill passed by Congress in December 2010 made significant changes to tax incentives for federal taxpayers who install qualified energy efficient retrofits in their home, including higher efficiency heating, ventilation, and air conditioning (HVAC) equipment in their primary residences. An eligible taxpayer may claim up to $500 in tax credits, subject to caps based on the type of equipment installed.
You may now qualify for tax credits equal to 10% of the costs (up to a $300 limit) for installing a high efficiency central air conditioner, heat pump, or hot water heater. You may also qualify for tax credits equal to 10% of the costs (up to $150 limit) for installing a qualified furnace or hot water boiler. A smaller tax credit of 10% of the installed costs (up to $50 limit) is available for installing a system with an advanced main air circulating fan.
Don’t waste any time because these tax credits are only available for improvements made in 2011. Not taking advantage of this incentive just leaves money on the table.
What Is Considered a High Efficiency Unit?
A split system central air conditioner must meet or exceed 16 SEER and 13 EER; package system central air conditioners must meet or exceed 14 SEER and 12 EER.
An air source heat pump must meet or exceed 15 SEER and 12.5 EER and 8.5 HSPF, in order to qualify for the tax credit. Package heat pump systems must meet or exceed 14 SEER and 12 SEER and 8 HSPF.
Natural gas furnaces, propane furnaces, natural gas hot water boilers, propane hot water boilers, oil furnaces, and oil hot water boilers all must meet or exceed 95% AFUE.
For the advanced main air circulating fan credit, the fan must use no more than 2% of the furnace’s total energy. If the fan is qualified, but the furnace is not, you will not be able to take 10% off the cost of the entire furnace. Ask your HVAC contractor to break out the cost of the fan in your bill. You can get a 10% tax credit on the cost of the fan alone. If the furnace is qualified, but the fan is not, you can still take the 10% tax credit on the full cost of the furnace.
Remember to always check with a CPA to make sure you qualify for tax credits.