Federal Tax Credits for Home Improvement
Please verify the following information with your tax preparer. We will provide all the documents you need.
Continuing into 2013, there is a federal tax credit for 30% of the installed cost of a geothermal system for your primary or secondary residence, with NO cap. Plus, there is a very generous APS rebate as well. These 2 incentives make geothermal affordable for most homeowners.
Please Note: . Geothermal Heat Pump systems .. AND .. Solar Hot Water systems qualify for entirely separate tax credits and utility rebates which do not affect the standard home efficiency tax credits … (CALL US FOR MORE INFO).
A complete list of qualifying improvements can be found at www.energystar.gov
Geothermal Heat Pump systems – 30% of cost (no cap) & a large APS rebate
Solar Hot Water systems – 30% of cost with no cap (plus AZ credit & APS rebate)
A/C (EER 12), Heat Pump (EER 12) – up to $270 APS rebate
Rooftop Package systems (EER 12) — up to $270 APS rebate
Tankless Hot Water Heaters – Energy Factor 0.82 — up to $300.
Frequently Asked Questions
What’s the difference between a tax credit and a tax deduction?
A tax credit applies directly against the taxpayers’ liability. A tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower tax bracket. Tax credits have a greater benefit to a taxpayer than a tax deduction. There are two categories of tax credits: Refundable and Non-Refundable. Residential Energy Tax Credits for 2009 and 2011 are considered to be Non-Refundable tax credits under the IRS regulations, just as the previous tax credits were for 2006 and 2007.
What is the difference between Non-Refundable and Refundable Tax Credits?
Most, but not all, tax credits are referred to as non-refundable credits. A non-refundable credit is a tax credit that can reduce your tax liability to zero (0), but not below. You must have tax liability on line 46 of Form 1040, line 18 of Form 1040A, or line 43 of Form 1040NR to claim a non-refundable tax credit. A refundable tax credit is a tax credit that can reduce your tax liability below zero (0). Because it is possible to receive a refund based on these types of credits, the credits are referred to as refundable..
Do the tax credits apply to the cost of the equipment or equipment plus labor?
The tax credit applies to the installed cost of the equipment that qualifies for the tax credits, which includes labor for that specific installation.
Can a homeowner claim credits for improvements to a second home, such as a vacation home?
Geothermal, the tax credit is available for the taxpayer’s primary residence & second home. Solar systems, the tax credit is available for the taxpayer’s primary residence & second home, as well.
Do “Energy Star” Certified products meet the requirements for the credits/rebates?
Because there are different equipment definitions and product tiers used by the “Energy Star” program, note that most “ENERGY STAR” products do meet the criteria for these tax credits, but not all of them do. Please refer to www.energystar.gov for more info.
What other types of energy efficiency improvements qualify for the tax credits?
Geothermal heat pump, wind power, and solar installations are currently the only home improvements remaining that have tax credits. The standard HVAC, window, and insulation credits have all expired.
How do homeowners claim the tax credits and receive their money?
Before filling for tax credits on any listed models, it is always recommended that homeowners/consumers consult with a tax professional to review the provisions of the “American Recovery and Revitalization Act of 2009″ (ARRA) in reference to Section 25C of the Internal Revenue Code. Previously, the IRS has directed taxpayers to use Form 5695, Residential Energy Efficient Property Credit. Taxpayers should keep copies of invoices and receipts to document their actual expenditures, but only need to file Form 5695 with their tax returns to get the tax credits.