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Federal Tax Credit FAQs
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1.) If I claimed up to $500 under the previous tax credit program in 2005 or 2006, can I still claim the full amount under this new plan? Yes, this new law removes all previous lifetime credit caps for home efficiency upgrades.
2.) Can I claim $1500 in 2009 and again in 2010? No, you can only claim the tax credit for the combined two-year period 2009 through 2010.
3.) Does the qualifying dollar amount include the installation costs? For HVAC equipment, the law defines the installation costs as "expenditures for labor costs properly allocable to the onsite preparation, assembly, or original installation of the property." In other words, YES!
4.) When does the plan go into effect? It is in effect now and is retroactive back to January 1, 2009. Equipment installed before this date does not qualify.
5.) How do I apply for the credit? Western Heating will provide you with a manufacturer’s certification form after your qualifying equipment is installed. You will then need to file IRS Form 5695 with your tax return.
6.) Why do only specific types of equipment qualify? The purpose of the plan is to encourage homeowners to install the most efficient equipment available. With current discounts, promotions and manufacturer’s rebates coupled with the tax credit, it is possible to realize a savings of over $3,000 for these high efficiency systems. This would be in addition to lower utilities, as well. Geothermal heat pump purchasers could see even greater savings (30% tax credit with NO LIMIT).
7.) Do I have to purchase a heating and cooling system together to qualify? No. You can purchase EITHER a qualifying furnace OR air conditioner/heat pump unit and receive a 30% tax credit up to $1,500. If a single piece of equipment is $5,000 or more, you would qualify for the entire $1,500 tax credit. At this point, we are unsure if you can purchase one qualifying piece of equipment and another non-qualifying unit and qualify it as a “system”. For example, you could purchase a qualifying furnace with a non-qualifying air conditioner and, as long as the total system installation price exceeds $5,000, you would possibly qualify for the entire $1,500 tax credit. Until clarification from the IRS is obtained, however, we advise that customers installing systems that utilize a piece of non-qualifying equipment, refer to their tax professionals before applying for this tax credit.
8.) How does the Advanced Main Circulating Fan credit work? There is no consensus or documentation to definitely determine how the tax credit for advanced main circulating fans will be handled. The new stimulus bill expanded this credit from a straight $50 credit for any furnace equipped with such a fan to 30% up to $1,500 for advanced main circulating fans that account for less than 2% of the furnace's total annual energy used. There remains uncertainty how the credit can be claimed on an advanced fan installed as part of a non-qualifying furnace (less than 95% AFUE). Until clarification from the IRS is obtained, which is not expected for some time, we advise that customers installing furnaces that would otherwise not qualify except for the advanced fan feature, refer to their tax professionals before applying for this tax credit.
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The federal tax credit is a "credit against tax" and "may not exceed the regular tax liability".
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