How has the new Stimulus bill affected the tax credits for energy efficient home improvements?

On February 17, 2009, President Obama signed a stimulus bill (The American Recovery and Reinvestment Act of 2009) that made some significant changes to the energy efficiency tax credits.

The highlights are:

• The tax credits that were previously effective for 2009 have been extended to 2010 as well.
• The tax credit has been raised from 10% to 30%.
• The tax credits that were for a specific dollar amount (ex: $300 for an AC) have been converted to 30% of the cost.
• The maximum credit has been raised from $500 to $1500 for the two years (2009-2010). However, some improvements such as geothermal heat pumps, solar water heaters, and solar panels are not subject to the $1,500 maximum.
• The $200 cap on windows has been removed, but the requirements for windows have been increased significantly. Not all ENERGY STAR qualified windows will qualify.

What are the minimum efficiencies necessary for HVAC product to qualify for the tax credit?

For a list of qualified products, go to www.KCHVAC.com.

Is the $1,500 tax credit available for each improvement? Can I get $1,500 for windows and another $1,500 for a new HVAC system?

No, the $1,500* tax credit is a total combined credit for all tax years (2009 & 2010) for each tax return filed. So, basically you can spend up to $5,000 during this 2 year period on a single or multiple improvements, and get 30% or $1,500* back as a tax credit.

What products are eligible for a tax credits for energy efficient home improvements? Are they available for new construction also? What about rental units and vacation homes?

Tax credits are available at 30% of the cost, up to $1,500 total, in 2009 & 2010 (for existing homes & your primary residence only).

How do I calculate the tax credit on a furnace/AC combination when both parts don’t qualify?

You are only eligible for a tax credit on the qualified component of this system. Ask your local, neighborhood HVAC contractor to separate out the cost of the qualified component (vs. the non-qualified component), and to provide a Manufacturer’s Certification Statement for the qualified component. (Source: IRS)

If I am getting a refund on my taxes, can I still get the tax credit for energy efficiency home improvements?

Most likely you can, as long as the total amount of income taxes that you have paid throughout the year (check your W2 for this amount) is more than the total amount of tax credits that you are claiming. You can’t get more money back from the government than you paid in income taxes.  If you don’t pay any taxes, then you can’t get the credit.  See the Instructions attached to 2008 IRS Form 5695 to help you further with this provision.

In Summary:

If your cooling system is needing replaced, now’s the time to do it, here’s why.

If you were to purchase a minimum efficiency air conditioner and a two-stage, standard efficiency furnace with an indoor coil, from a reputable dealer, with a decent warranty, you can expect to pay around $5500 or so, depending on quality of installation.  If you were to upgrade to the 15 SEER air conditioner and the furnace with the variable speed blower, the difference in price is less due to the rebates and incentives that are available.

Now that we are all part of KCP&L, take advantage of the 8-14 SEER incentive.  If you have an operating 8 SEER system and you purchase a 14 SEER unit, KCP&L reimburses the Cool Homes contractor $650 and $850 for going to a 16 SEER.  Visit www.CoolHomesKC.com to schedule a FREE Cool Homes Check.

The above opinions are subjective based on facts, for more discussion please email me:  Chris@BoanHeating-Cooling.com.

(Source: U.S. EPA/ENERGY STAR®)