Federal Tax Credits

How do the 2009 Federal Tax Credits Affect Me?

Signed into law by President Barack Obama on February 17, 2009, the American Economic Recovery Act (ARRA) is intended to provide stimulus in the wake of the recent economic downturn. This $787 billion Federal Stimulus package offers consumers a unique opportunity to replace old, inefficient Heating, Cooling, and Plumbing systems and in the process reduce energy output, help the environment, improve home comfort and receive a 30% tax credit.

Under the ARRA, homeowners can claim up to 30% (up to a $1,500 limit) for the installation of higher efficiency furnaces, boilers, air source heat pumps, central air conditioners, and hot water heaters in the tax years, 2009 – 2010. Whereas the previous tax credits were limited to $300 for central air conditioners and $150 for furnaces and boilers, now homeowners may use the entire $1,500 tax credit limit on a single qualifying improvement.

Residential Tax Credit Details:

• Larger Tax Credit
  Homeowners may be able to claim tax credits equal to 30% of the installed costs (up to $1,500) on qualified improvements.
   
• Longer Term
  The new tax credits are retroactive to January 1, 2009, and will expire on December 31, 2010. The $1,500 limit is not $1,500 each year, but for all improvements made during the two-year term.
   
• Per-Appliance Caps Removed
  Homeowners 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 $300 for a high efficiency central air conditioner or heat pump or $150 for a high efficiency furnace have been removed.
   
• Lifetime Limit Removed
  Homeowners that previously claimed tax credits in 2006 or 2007 are eligible for the full $1,500 limit.
   
• Expanded Geothermal Tax Credits
  The $2,000 tax credit limit has been removed. Homeowners who install geothermal heat pump systems may be able to claim up to 30% of the installed costs in tax credits in the year the system is placed into service. The geothermal tax credit has a longer term, from January 1, 2009 and expires December 31, 2016.

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