2011 Changes to Federal Tax Credits Available for Qualifying Residential Systems
Federal tax credits on qualifying, high-efficiency HVAC equipment have been modified and extended through December 31, 2011 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This program differs from the program effective in 2009-2010 in the following ways:
- The maximum amount an eligible homeowner may receive in tax credits for purchasing qualifying products, whether those purchases are in the form of upgraded insulation, windows, HVAC equipment or other eligible improvements, will be reduced from $1,500 to $500.
- The $500 cap is reduced by the total amount of residential energy property credits a homeowner has claimed for purchases between 2006 and 2010. If you have already claimed credits of $500 or more from improvements made prior to 2011, you will be unable to claim new credits for improvements made during 2011.
- All furnaces and boilers, whether natural gas, propane or oil, must have an AFUE of 95 or above to be eligible for the credit.
- The credit is no longer 30% of qualified residential energy property costs (including labor), but is now equal to an amount not to exceed:
| Maximum Tax Credit Available |
Product Type |
Efficiency Requirements |
| $50 |
Any advanced main air circulating fan |
*See below |
| $150 |
Natural gas, propane, oil furnace or boiler |
95% AFUE |
| $300 |
Split system air conditioner |
16 SEER / 13 EER |
| $300 |
Split system heat pump |
15 SEER / 12.5 EER / 8.5 HSPF |
| $300 |
Package air conditioner |
14 SEER / 12 EER |
| $300 |
Package heat pump |
14 SEER / 12 EER / 8 HSPF |
| $300 |
Package gas / electric |
14 SEER / 12 EER |
*Electricity use of no more than 2% of the total energy use of the furnace
Geothermal system tax credits are unaffected by these changes and remain in place as is through 12/31/2016.
Note: this bulletin is for discussion purposes only and is general in nature. This is not to be considered tax advice. See your tax professional to determine how these credits would apply in your circumstance.
So...what is a "tax credit"? A tax credit is generally more valuable than a tax deduction or tax allowance of the same magnitude because a tax credit reduces tax directly, while a deduction or allowance only reduces taxable income and so the reduction in tax is only a fraction (the marginal tax rate) of the deduction of allowance.
The standards for the systems are high, but in the long-term will save the consumer a significant amount of money. For more information, please visit www.energystar.gov
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