Q: Is this a refundable or non-refundable tax credit?

A: The residential energy efficiency credits are non-refundable tax credits which mean that they cannot bring a taxpayer's annual tax liability below zero. NOTE: this is not related to refund amounts when filing taxes. This tax credit is available to any taxpayer whose income generates more than $1,500 in taxes owed annually.

Q: Do electric water heaters qualify for the tax credit?

A: Only electric heat pump water heaters with energy factors of 2.0 or greater qualify for the residential tax credit. Gas, oil, and propane water heaters must energy factors of .82 or greater OR have a thermal efficiency of at least 90%.

Q: Do improvements to manufactured housing qualify for this tax credit?

A: Yes. Here is the specific language regarding eligible improvements to manufactured houses:

The term “dwelling unit” includes a manufactured home which conforms to Federal Manufactured Home Construction and Safety Standards (section 3280 of title 24, Code of Federal Regulations).

Q: Did this stimulus bill do anything for commercial buildings?

A: There are significant appropriations and potential for funding for energy efficiency improvements to government buildings, public housing, and schools in this stimulus bill, but standard commercial buildings were already offered a tax credit of up to $1.80/sq ft for energy efficiency improvements that reduce heating and cooling energy consumption by at least 50% as part of the 2008 "bailout bill". There is also a $.60/sq ft tax credit available for smaller efficiency improvements to commercial buildings. You can find more detail about these commercial credits here.

Q: Does the final installed cost qualified HVAC equipment include sales tax?

A: Yes. The tax code language states "amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during such taxable year" which HARDI and Energy Star interpret as the final cost which would include sales tax. However, sales tax on non-qualifying work performed on that same installation should not be included when determining the credit-eligible amount.

Geothermal Heat Pumps in New Residential Construction Appear to Qualify

It now appears that geothermal heat pumps installed in residential new construction, as well as other on-site generation systems such as solar electric and solar hot water heating, do qualify for this increased tax credit. Check out this page for more information and check back for future updates as we work to get more verification on this.

Q: Is this a tax credit or tax deduction?

A: While the IRS is not expected to release the updated forms and instructions for filing for this residential energy efficiency tax credit for several months, the IRS has clarified that this is a non-refundable tax credit. That means that the credit cannot reduce a taxpayer's annual tax liability below zero. This is separate from the refunds received after filing, which has to do with deductions, exemptions, and the level of paycheck withholdings. Essentially, this non-refundable tax credit is available to any taxpayer whose annual tax liability exceeds $1,500. Here's more on how homeowners should file for this credit.

Q: Are there any other places to find HVAC tax credit information?

A: Yes. In addition to HARDI's summary, http://www.dsireusa.org/ is possibly the most complete resource for any and all kinds of energy efficiency incentives. The Energy Star website also has a page on energy efficiency tax credits which has been updated and is now current.

Q: What does the homeowner need to do to claim the credit?

A: Upon completion of the installation, the homeowner should keep a copy of the contractor's invoice and copy for each piece of qualifying equipment of the Manufacturer's Certification Statement. Homeowners will need to file IRS Tax Form 5695 (2009 version) with their tax return. The 2009 version of this form will be available late 2009 or early 2010.

Q: If a customer installed a system this year that qualified for the previous $500 lifetime credit, does that count towards this new, higher credit?

A: Yes. Any installation performed on January 1, 2009 to February 16, 2009 that qualified for the previous credit (CEE top tier 2006, 95% or better furnaces and boilers), will qualify for this expanded credit up to $1,500.

Q: Are programmable thermostats eligible for this tax credit?

A: No.

Q: Do mini-splits qualify for either the air-conditioning or heat pump credit?

A: Yes, as long as they meet or exceed the minimum qualifications for split air-conditioners (16 SEER and 13 EER) or split heat pumps (8.5 HSPF, 15 SEER, 12.5 EER)

Q: What about replacement jobs in which a 95% AFUE furnace but only a 13 SEER a/c is installed?

A: 30% of the final installation costs up to $1,500 associated specifically with the 95% AFUE furnace will qualify for the credit. Should the installation costs associated with the furnace not reach $5,000, 30% of the installation cost can still be claimed and the difference between that amount and the $1,500 cap can be applied to any other qualifying improvements.

Q: What about solar and geothermal systems?

A: 30% of the total installation costs of solar hot water, solar electricity, wind generation, and geothermal heatpumps can now be recovered as a tax credit without any dollar limitations. For these technologies only, installations for new construction do qualify.

Q: What about envelope improvements?

A: Upgrades to doors and windows must now have U-factors or SHGC of .30 or lower to qualify and insulation must meet 2009 IECC requirements. These improvements count towards the $1,500 cap in 2009 and 2010. The previous thresholds qualify for the credit if installed between 1/1/09 and 2/16/09.

Q: What if a customer claimed the $500 efficiency credit previously in 2006, 2007, or 2009?

A: It does not affect this credit. Those same customers are still eligible for the full $1,500 credit for qualified improvements made in 2009 and 2010.

Q: Is it a $1,500 credit in both 2009 and 2010?

A: No. $1,500 is the total credit available to primary residence households for 2009 and 2010.

Q: Do installations for new construction and/or commercial customers qualify for these credits?

A: No except for on-site renewables such as geothermal and solar. Besides those, these credits only apply to residential replacements with qualifying HVAC equipment. There are separate incentives from previously passed bills for new residential construction. However, on-site renewables generation such as solar, geothermal, and wind qualify for new construction credits, but not the envelope or HVAC credits addressed above. Take a look at this page for more clarifications about new residential construction.

Q: When do these new credits go into effect?

A: Unless stated otherwise in the bill, January 1, 2009 is the effective date. Specifically regarding the residential efficiency credits, the expanded $1,500 credit is retroactive to the start of 2009. Products that qualified for the existing $500 credit will still qualify for the $1,500 credit if installed prior to 2/17/09. Equipment installed 2/17/09 through 12/31/2010 must meet the minimum requirements outlined in HARDI's summary of the bill.