2009 HVAC Tax Credits for Homeowners | www.hvactaxcredits.com On February 17, 2009, President Obama signed the "American Recovery and Reinvestment Act of 2009 (ARRA)" into law. This bill combines spending and incentives to move the American economy forward by investing in infrastructure and increasing energy efficiency of residential/commercial buildings in America. Specifically for indoor comfort control, the American Recovery and Reinvestment Act makes a number of important changes to the existing federal incentives for homeowners who make qualified improvements on high efficiency products in their primary residences. The limits have been increased up to 30% of the installed cost of those improvements, or up to a total of $1,500 for residential products installed from January 1, 2009 through December 31, 2010. The following information has been prepared to help answer those frequently asked questions on this complicated issue for residential indoor comfort control equipment. Before filing on any of the listed models, it is always recommended that homeowners consult with a professional to review the provisions of the "American Recovery and Reinvestment Act of 2009" (ARRA) and application in reference to Section 25C of the Internal Revenue Code. Taxpayers should keep copies of invoices and receipts for documenting their actual expenditures, but only need to file Form 5695 with their returns.

Frequently Asked Questions About HVAC Tax Credits

What are the qualifying criteria for residential equipment?

The revised criteria for qualifying residential HVAC equipment under Section 1121 of the 2009 HVAC Tax Stimulus legislation are as follows.

1. A natural gas, propane, or oil furnace rated at 95.0% AFUE or higher.

2. Any furnace equipped with an advanced main air circulating fan that uses no more than 2% of the total furnace total energy use.

3. A central air conditioner that achieves the highest efficiency tier established by the Consortium for Energy Efficiency as in effect on January 1, 2009 (which is 16 SEER or higher, 13 EER or higher rating). Previously, the criteria were 15 SEER, 12.5 EER which is no longer valid.

4. An electric air source heat pump that achieves the highest efficiency tier established by the Consortium for Energy Efficiency as in effect on January 1, 2009 (which is 15 SEER or higher, 12.5 EER or higher, 8.5 HSPF or higher rating). Previously, the criteria were 15 SEER, 13 EER, 9 HSPF as stated in the text of the legislation rather than being tied to the CEE highest efficiency tier level for electric air source heat pumps.

What is an "advanced main air circulating fan?
An advanced main air circulating fan is a blower/fan used in a natural gas, propane, or oil furnace originally placed in service by the taxpayer during the taxable year, and which has an annual electricity use of no more than two percent of the total annual energy use of the furnace (as determined in the standard Department of Energy test procedures). This criteria does not apply to air handlers with variable speed motors, as the benefit of the advanced main air circulating fan has already been included in the energy efficiency ratings of the outdoor products.

What’s the difference between a credit and a deduction?
The first applies directly against the liability while a deduction applies against income, lowering the adjusted gross income and possibly moving the individual to a lower bracket. A credit has a greater benefit than a deduction. There are two categories: Refundable and Non-Refundable. Residential stimulus for 2009 and 2010 is considered to be Non-Refundable under the IRS regulations, just as for 2006 and 2007.

What is the difference between Non-Refundable and Refundable Tax Credit?
Most, but not all, are referred to as non-refundable credits. A non-refundable credit is one that can reduce your tax liability to zero (0), but not below. You must have tax liability on line 46 of Form 1040, line 18 of Form 1040A, or line 43 of Form 1040NR to claim non-refundable. A refundable credit is one that can reduce your liability below zero (0). Because it is possible to receive a refund based on these types of credits, they are referred to as refundable.

Can a homeowner claim $1500 for improvements made in 2009, and then again claim for more improvements made in 2010?
No, taxpayers are eligible for a total of $1500 for improvements made over the combined two year period.

Can a homeowner use the $1500 towards a single appliance installation?

Yes, since the per appliance caps have been removed by this new legislation, a homeowner may use the entire $1500 for installing a single qualified appliance, such as a furnace, air conditioner, heat pump, etc. up to 30% of the installed cost of that one appliance.

What happens if the 30% of the installed cost is less than the $1500 limit?
The homeowner can "bank" the remaining amount available towards the cost of other qualified improvements during the two year period. Any single item that the installed cost is more than $5000 will instantly reach the $1500 limit.

Does the stimulus apply to the cost of the equipment or equipment plus labor?
The federal stimulus applies to the installed cost of the equipment that qualifies, which includes labor for that specific installation.

Can a homeowner claim credits for improvements to a second home, such as a vacation home?
No, the program is only available for improvements made to the primary residence or home, and may not be used for second or vacation homes

Can a small business that operates out of a townhouse and installs residential equipment in a commercial setting claim the credit?
No. It may only be claimed on their personal income taxes for improvements to their primary residence.

Do "Energy Star" Certified products meet the requirements?
Because there are different equipment definitions and product tiers used by the "Energy Star" program, note that most "ENERGY STAR" products do meet the criteria, but not all of them do. Refer to the qualifying criteria as shown on the "Energy Star" website and the criteria for the federal incentives.

What if someone had made claims on improvements made during 2006 or 2007?
The "lifetime caps" that placed limits on the totals available have been removed. Any previous claims do not count against the current $1500 limit.

What other types of energy efficiency improvements qualify?
Homeowners may be able to qualify if they make qualified improvements to windows and doors including skylights, storm windows and storm doors; roofing including metal and asphalt roofs; and insulation. All of these improvements qualify, but homeowner may only claim $1500 in total for any improvements. The exception to this is for geothermal heat pump applications and installations, where there is no limit on the amount.

How do homeowners claim and receive their stimulus money?
Before filing on any listed models, it is always recommended that homeowners/consumers consult with an accounting professional to review the provisions of the "American Recovery and Reinvestment Act of 2009" (ARRA) in reference to Section 25C of the Internal Revenue Code. Previously, the IRS has directed to use Form 5695, Residential Energy Efficient Property Credit. Taxpayers should keep copies of invoices and receipts to document their actual expenditures, but only need to file Form 5695 with their returns.

Should a contractor promise a homeowner they will qualify?
No, as each situation may be different. The contractor may not know if the owner has already made other improvements that qualify, or if their tax situation will change by the end of the year. But to be safe, the contractor can always say "by installing qualified equipment, the homeowner may be qualified to claim of 30% of the installed costs (up to a $1,500 limit)." And the contractor should always advise the homeowner to refer to the applicable IRS forms and regulations.

What if a homeowner had already completed energy improvements under the provisions of the "Emergency Economic Stabilization Act of 2008" for 2009 that no longer qualify under this new bill?
The "American Recovery and Reinvestment Act of 2009" replaces all of the provisions of the previous incentives for these products. Refer to the appropriate IRS rules, regulations, and information on this topic.

What are the requirements on package units used for residential applications and installations?
The information on the criteria for packaged products is included in the reference material found at the end of this letter. Information for York packaged air conditioning products is available from the Commercial Product group since that product family falls under their responsibility.

What should be done with manufacturer’s certificates already published for 2009?
Please note that there are significant changes to the qualifying criteria for high efficiency products and to other provisions related to HVAC equipment under this new legislation. Because of these changes, previous versions of certificates which specify qualifying residential equipment are no longer valid and should not be used at this time.

Since the ARRA legislation is retroactive for all qualifying equipment installed in 2009, updated certificates showing qualifying equipment have been prepared. Certificates can also be downloaded from the AHRI and GAMA websites indicated at the end of this document if manufacturer’s certificates are not yet available.

Additional Resources:

This document was prepared using information from a number of sources, including the following websites. Additional information may be found at:

ACEEE (American Council for an Energy-Efficient Economy)
http://aceee.org/energy/national/taxkey.htm

ACCA
http://www.acca.org/press/news.php?id=215

AHRI
http://www.ahrinet.org/Pages/ShowMeMore.aspx?src=single&lpk=741/

CEE (Consortium for Energy Efficiency)
http://www.ceehvacdirectory.org/

Energy Star
http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#s9/

GAMA (Gas Appliance Manufacturers Association)
http://www.gamanet.org/gama/inforesources.nsf/vContentEntries/Product+Directories?t/

Heating, Air conditioning and Refrigeration Distributors International (HARDI)
http://www.hardinet.org/

Assistance Project
http://www.energytaxincentives.org/general/legislative.php

Reference Material:
Consortium for Energy Efficiency (CEE) - High Efficiency Specification, January 1, 2009

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