Federal Tax Credits

American Recovery and Reinvestment Act of 2009 (ARRA)

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. As a result of this act, the federal government announced tax credits for consumers who purchase qualifying high-efficiency heating and cooling products for their homes among other methods of saving energy.

New Changes for 2011: Federal tax credits on qualifying, high-efficiency HVAC equipment have been modified and extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, however, the amount of the tax credit has changed from "up to $1500" to "up to $500" for qualifying products.

What's the difference between a tax credit and a tax deduction?
A tax credit is a direct reduction of the taxpayer's tax liability. A tax deduction is a reduction of a taxpayer's taxable income upon which the tax liability is calculated. Tax credits provide a great benefit to a taxpayer. To take this credit, the IRS requires Form 5695.

Air Conditioning and Heating productsare eligible.
The tax credits apply to a variety of products including heating and cooling, windows and doors, and more. The amount of the credit is up to $500 for HVAC equipment. The products must be installed in the tax year 2011. There are strict guidelines as to what qualifies and what doesn't. Check with your tax advisor on how to best take advantage of the tax credits.

What are the qualification requirements for Air Conditioning and Heating products?
The 2011 Changes to Federal Tax Credits Available for Qualifying Residential Systems are:
Federal tax credits on qualifying, high-efficiency HVAC equipment have been modified and extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This program differs from the program effective in 2009-2010 in the following ways:

• The maximum amount an eligible homeowner may receive in tax credits for purchasing qualifying products, whether those purchases are in the form of upgraded insulation, windows, HVAC equipment or other eligible improvements, will be reduced from $1,500 to $500.
• The $500 cap is reduced by the total amount of residential energy property credits a homeowner has claimed for purchases between 2006 and 2010. If you have already claimed credits of $500 or more from improvements made prior to 2011, you will be unable to claim new credits for improvements made during 2011.
• All furnaces and boilers, whether natural gas, propane or oil, must have an AFUE of 95 or above to be eligible for the credit.
• The credit is no longer 30% of qualified residential energy property costs (including labor), but is now equal to an amount not to exceed:

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Air Conditioners	16.0 SEER / 13.0 EER	Heat Pumps	15.0 SEER / 12.5 EER 8.5 HSPF
Gas Furnaces	95% AFUE	Pkg. Heat Pumps	14.0 SEER / 12.0 EER 8.0 HSPF
Oil Furnaces	95% AFUE	Pkg. Air Conditioners	14.0 SEER / 12.0 EER