How to Receive a Tax Credit for Air-Source Heat Pumps

Air-source heat pumps are used in moderate climates to heat or cool a home. These electric systems use the air from outdoors to regulate the temperature within your home. Recent U.S. tax law changes are providing savings for energy-efficient air-source heat pump purchases. The government has started a new tax credit program to encourage homeowners to invest in energy saving "green" products. Energy-efficient products will conserve energy and reduce costs to consumers by using the latest energy conservation materials available.

Things You'll Need

• New air-source heat pump (approved model)
• Receipt
• Manufacturer's certification statement

Instructions

1. Look at the energy-efficiency tax-credit savings available before purchasing an air-source heat pump. The American Recovery and Reinvestment Act of 2009 has introduced new energy-efficiency tax credits for 30 percent of the total cost of new energy-efficient products of up to $1,500. For example, units costing $3,000 will be eligible for a $900 tax credit. Any unit exceeding $5,000 will be subject to the maximum eligible for a tax credit of $1,500.

2. Look for an air-source heat pump that meets the energy-efficiency requirements outlined by the government. Not all products with the Energy Star seal are eligible for this tax savings. To ensure you receive the maximum savings on air-source heat pump products, visit the Energy Star website link in the Resources section.

3. Purchase and install your new energy-efficient air-source heat pump. Visit the air-source heat pump information and heat pump model information websites for additional product specifications.

4. Keep all receipts for your new air-source heat pump product. The IRS recommends saving the manufacturer's certification statement as well. This certification should be included with your purchase. The Internal Revenue Service will not require the certificate to be filed with taxes. The certificate just ensures that you are purchasing the correct product for your region to qualify for the tax credit savings.

5. File for the tax credit on your energy-efficient air-source heat pump using IRS Tax Form 5695. This form will be ready for the 2010 tax year. The energy-efficiency tax rebate should be claimed when filing those taxes.

Tips & Warnings

• This new energy tax credit replaces the previous tax credits allowable as set in the Energy Policy Act of 2005. The old policy limited the energy-efficiency tax credit to a maximum of $500. The new tax credit limit was increased to $1,500.

• This is a particularly valuable tax savings. Tax credits are a substantially better benefit than a tax deduction. A tax credit of $1,500 will actually lower your taxes by $1,500. Expenses eligible for a tax deduction of $1,500 will result in only a small portion of the $1,500 to be returned to the consumer.

• This report is meant to serve as a guideline. Always consult with a tax professional to receive the most up-to-date tax information.

Resources

• EnergyStar.gov: Energy-efficiency tax credit information
• EnergyStar.gov: Air-source heat pump information
• EnergyStar.gov: Heat pump model information