How to Receive a Tax Credit for a Propane Furnace

Newer models of propane furnaces have been designed to utilize energy more efficiently. Propane furnaces are one of the several new energy efficient home heating options available. These furnaces decrease your energy usage as well as your energy costs. Replacing your old furnace with a propane furnace can provide you with up to $1,500 in extra savings under US tax laws. The government has an established tax credit program which encourages homeowners to invest in energy saving "green" products. Encouraging product purchases which use the latest energy conservation materials will decrease the energy consumption for our entire nation.

Things You'll Need

• New energy efficient propane furnace (approved model)
• Receipt for new energy efficient furnace
• Manufacturer Certification Statement

Instructions

1. Read through the energy-efficient tax credit options available before purchasing a propane furnace. The American Recovery and Reinvestment Act of 2009 offers energy efficient tax credits for 30 percent of the total cost of energy efficient products up to a maximum level of $1,500. Any unit with a value exceeding $5,000 will be subject to the maximum eligible level tax credit of $1,500.

2. Look for propane furnaces that meet the energy-efficient requirements as outlined by the U.S. government. Note that not all propane furnace products with the Energy Star seal are eligible for this tax savings. To qualify, the furnace must have an annual fuel usage efficiency (AFUE) of 95 percent or greater. The higher the AFUE the more efficient the propane furnace. The Gas Appliance Manufacturers' Association (GAMA) provides information on hundreds of propane furnace model and their corresponding AFUE. The website for GAMA information can be found in the Resources section below.

3. Buy and install the energy-efficient propane furnace. Save all receipts and keep all records on the purchase of new propane furnace for tax purposes.

4. Find and save the Manufacturer's Certification Statement. The IRS recommends saving this statement to make sure you have purchased the correct product to qualify for the credit. This certification should be included with your purchase. The Internal Revenue Service will not require the certificate to be filed with taxes.

5. File for your tax rebate using IRS Tax Form 5695. The government will not have Form 5695 available until the end of the 2009 tax year. You must claim your energy-efficient tax credit when filing your taxes. Tax credits are a substantially better benefit than tax deductions. A tax credit of $1,500 will actually lower your taxes by $1,500. Expenses eligible for a tax deduction will only result in a small portion of the set amount returned to the consumer. For example if you are in the 28 percent tax bracket, you will only receive a credit for 28 percent of $1,500.

Tips & Warnings

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

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

Resources

• Energy Star Tax Credit Guide
• GAMA product model information