As we near April 15th, many Americans are preparing to submit their taxes and making sure that not only is all income reported properly, but all credits that are due are reported. What you may not know is that if you upgraded your HVAC system to a more energy-efficient model in 2019, there may be credits that you qualify to receive. If you are planning to do so in 2020, these are things you can keep an eye out for to gain credits on your next year’s taxes!
Solar Energy Tax Credits
If you have a solar-ready heat pump or air conditioner installed prior to December 31, 2021, you may be able to qualify for a credit representing up to 9% of the equipment’s overall cost. Additionally, credit may be available for the solar modules used to power these HVAC components. Through the end of 2019, 30% of the module’s cost and installation could be counted as a credit; in 2020, this goes up to 26%, and in 2020 it will be 22%. The earlier you make these decisions, the higher credits you may be eligible to receive! The only other caveat is that these must be primary or secondary residences and not rental properties.
Efficiency Improvement Tax Credits
As of December 2019, tax credits for energy-efficient HVAC improvements became retroactive through 2018. If in the last two years you have made a qualified HVAC improvement, you may be eligible to claim 10% of the installation costs, up to $500. These credit opportunities last through 2020 and it’s unknown if they will renew, so if you are considering making changes, doing it now will ensure you qualify.
Any purchases must be Energy Star certified to quality, meaning the manufacturer has proven that the model uses less energy than similar products while maintaining the quality of output. Some examples of products and the credits are:
- Water heaters ($300 credit)
- Furnaces and fans ($150 credit)
- Hot water boilers ($150 credit)
- Central air conditioning ($300 credit)
- Heat pumps ($300 credit)
These appliances must be installed in an existing home that is not a rental property to be eligible.
Applying for the Credits
Once you have your new appliances installed, be sure to keep all documentation of spend and certifications. You can then fill out IRS Form 1695, a standard form with clear instructions. You’ll fill the form out based on the units and their associated model information. You can submit this electronically or on paper with the rest of your taxes.
Then, like any other tax credit, the amount you qualify for will be attributed. For example, if you owe $2,000 in taxes and receive $450 in credits, you will then only owe $1550. If you do not owe taxes, the credit will come in the form of a refund.
If you are considering upgrading your HVAC system, now is the time to take advantage of these tax credits. Contact Comfort Experts today for advice on what equipment works best for you and how to get started with installation.