The Home Furnace Energy Tax Credit
As an incentive for homeowners to reduce carbon and energy emissions, the Department of Energy, the Environmental Protection Agency and the Internal Revenue Service are working together, to provide tax credits for homeowners purchasing lower-energy products. In addition to energy-efficient improvements for taxpayers' primary homes, the American Recovery and Reinvestment Act of 2009 allows taxpayers to replace their existing home furnace with a certified energy-efficient furnace and receive a tax credit for 2009 or 2010.
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Furnace Types
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Homeowners may use the tax credit to purchase natural gas, oil propane furnaces. Heat pumps do not qualify for the tax credit. An eligible furnace uses a combination of air and fuel to produce heat.
Certification
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Unlike household appliances eligible for tax credits, the government does not maintain a list of eligible products. The federal government allows taxpayers to purchase most Energy Star certified furnaces with an Annual Fuel Utilization Efficiency of 95 or greater for gas furnaces. Certified Energy Star oil furnaces use an Annual Fuel Utilization Efficiency of 90 or greater. AHRI or the Air Conditioning, Heating and Refrigeration Institute provide a comprehensive list of products that qualify for energy efficient approval. Taxpayers must obtain a certification statement from the product manufacturer for the tax credit. The manufacturer's certification contains a signed declaration that the product qualifies for credit according to the Department of Energy and Environmental Protection Agency's standards. Taxpayers can obtain these statements from the manufacturer's website or by contacting the manufacturer if the product does not come with an accompanying certification. Taxpayers keep this certification statement for record keeping purposes only and should not return them with their returns.
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Tax Credit Timing and Requirements
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To claim the tax credit, homeowners must install the new furnace in their existing principal residences. Newly constructed homes and investment properties or second homes do not count as principal residences. Similarly, renters may not claim the credit. Homeowners must install and use the furnace in their homes between January 1, 2009 and December 31, 2010. Taxpayers claim their tax credits on IRS Form 5695 with their year-end tax returns for 2010. For 2009, taxpayers claimed the credit on Line 52 of their 1040 Forms.
Tax Credit Limits
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The IRS limits the tax credit for replacement furnaces to 30 percent of cost or an aggregate $1,500 for multiple improvements. The credit allows taxpayers to receive a refund of 30 percent of the furnace's cost or make improvements of up to $5,000 with $1,500 refunded to the taxpayer. Taxpayers may claim a total $1,500 tax credit for 2009 and 2010. Homeowners can spread the credit over two years or take the total $1,500 in one year. Unlike some other energy-efficient improvements, tax credits for furnace replacement may include the costs of installation or labor.
Considerations
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Since tax laws frequently change, you should not use this information as a substitute for legal or tax advice. Seek advice through a certified accountant or tax attorney licensed to practice law in your jurisdiction.
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References
- Photo Credit heat sink image by Sonar from Fotolia.com
