HVAC Tax Credits in "The American Recovery and Reinvestment Act of 2009"

This memo contains a summary of important HVAC-related tax credits included in the 2009 stimulus package and answers to frequently asked questions about the new legislation. These are general guidelines only and may not be applicable in all circumstances. Taxpayers are encouraged to consult with a tax professional. On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) into law. The legislation combines spending and tax incentives designed to get the American economy moving again by investing in our nation’s road and energy infrastructure, and providing incentives for increasing the energy efficiency and performance of America’s homes and commercial buildings. Specifically for HVAC contractors, the new law makes important changes to existing tax incentives for homeowners who make qualified improvements to HVAC, water heating equipment, and other energy related improvements to their primary residences.

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Residential Tax Credit Details

Greater Tax Credit: For qualified improvements (see the table below), homeowners may be able to claim tax credits equal to 30% of the installed costs (up to $1,500).

Longer Term: The new tax credits are retroactive to 1/1/2009 and expire on 12/31/2010. The $1,500 limit is for all improvements made during the two year term, not $1500 each year.

Per-Appliance Caps Removed: Subject to the 30% of installed cost limitation, homeowne rs may use the entire $1,500 tax credit limit on a single qualifying improvement. The previous per-appliance caps that limited the homeowner to just $150 for a high efficiency furnace or $300 for a high efficiency central air conditioner or heat pump have been removed.

Lifetime Limit Removed: Homeowners that previously claimed tax credits in 2006 or 2007 are eligible for the full $1,500 limit. Also, HVAC contractors should be aware that the $1,500 limit applies to many types of energy efficient home improvements, including windows, doors, shingles, and insulation. All of these various contractors will be competing with HVAC contractors for the work related to these tax credits.

Click here to read the full summary of how you can benefit from the President Obama's stimulus package including list of frequently asked questions.