Heating and Air Federal Tax Credits

Save money with federal tax credits

Federal Tax Credits for Energy Efficiency

Tax Credits for 2010

Certain items are eligible for the Residential Renewable Energy Tax Credit. The amount of the Tax Credit is 30% of the cost up to $1,500 and expires December 31, 2010. The improvements must be on your existing,  personal residence. New construction and rentals do not qualify. You must keep your receipts and the Manufacturer’s Certification Statement. For products “placed in service” in 2010, you would take the tax credit on your 2010 income taxes by submitting Form 5695 Residential Energy Credits with your taxes. There is no upper or lower limit on income for the energy efficient tax credits.

Items that qualify include:

  • Heating, Ventilating, Air Conditioning (HVAC) Systems (details on HVAC tax credit)
  • Insulation
  • Water Heaters (non-solar): Gas, oil propane, electric heat pump.
  • Geothermal Heat Pumps

Residential HVAC products including: Central A/C, Air Source Heat Pumps, Geothermal Heat Pumps, Gas-Oil-Propane Furnaces, and Water Heaters are eligible for tax credits anywhere from $50-$300 and for Geothermal Heat pumps, the tax credit is 30% of the cost of the system, up to $2000.

Keep in mind however, that there are specific requirements and restrictions for the times these items are placed in service, as well as efficiency ratings. Not all furnaces or central a/c systems or heat pumps will qualify. As a general rule, 95% efficiency furnaces, 15 SEER Central AC systems, 14 SEER Packaged systems, 15 SEER Air Source Heat Pumps and certain water heaters qualify. The Tax Credit includes installation costs for HVAC systems and water heaters that qualify. The Tax Credit does NOT include installation costs for insulation.

You can learn more about which items qualify for the tax credit and how to apply for the tax credit at the EnergyStar.gov website.

Tax Credits for 2009

For products “placed in service” in 2009, you need to file the 2009 IRS Form 5695 and submit it with your 2009 taxes (by April 15, 2010).

The Economic Advantage of Tax Credits

The reason many homeowners are so excited about this program is because tax credits, unlike deductions, are subtracted directly from the total amount you owe on your personal income taxes. For example, if you complete your tax return and calculate that you owe the IRS $2,000, a tax credit of $1,500 will reduce your tax bill to only $500. Of course, be sure to check with your tax adviser on how to best take advantage of the tax credits.