Tax Credits on New Furnaces

Buying a more energy efficient furnace for yourto be replaced, the furnace it self and the
home can save you a lot of money on energycirculation fan that forces air throughout your
bills, but it takes time for the utility bill savings tohome. Since the achieving ultra high efficiency
add up to the initial outlay cost of the newrates of newer furnaces requires what is known
furnace. Since energy efficient furnaces are goodas an 'advanced technology main air circulation
for everyone (less pollutants, less demand forfan', you are probably going to have purchase
fossil fuels) the federal government provides taxthem both. For a natural gas or propane furnace
credits for the 2009 and 2010 tax years tothe determination is simple: if the furnace has an
incentivize their purchase. This article will discussannual fuel utilization efficiency (AFUE) rating of
the extent of these credits, how to qualify for95% or more then the furnace qualifies for the
them, and how to collect them.rebate. The circulation fan's requirement is a bit
First let's clear up what a 'tax credit' is since itmore confusing: the energy it uses must account
causes a lot of confusion. When you earn incomefor less than 2% of the furnace's total annual
the government uses a bunch of complicatedenergy used. The Department of Energy has
formulae to figure out how much in taxes youspecific test procedures in place to establish what
owe them. After that number is calculated, a taxqualifies. Your furnace salesman and/or
credit directly reduces that number by theserviceman will be able to show you these
amount of the credit. No matter what else younumbers.
do, though, the maximum amount of tax creditAssuming you meet both of those requirements,
you can get is the amount of taxes you mustthe tax credit you are entitled to is 30% of the
pay on your income. This doesn't mean you can'ttotal cost of the furnace and fan including
get money back from the government, it justinstallation costs. If only one of the components
means you can't get more back than you paid tomeets the requirements you must get your
them. Consider getting a $1,500 tax credit in eachinstallation expert to itemize your bill for installation
of these scenarios:of each component since you can only claim the
- If you made $50,000 in a year and havecredit on the installation of the qualifying
already paid $6,000 in taxes but the governmentcomponent. Regardless, the credit is capped at
says you must pay another $4,000, your tax$1,500.
credit would reduce the amount you owe byThis $1,500 cap comes under the general cap for
$1,500 to $2,500.energy efficiency tax credits for 2009 and 2010.
- If you made $50,000 in a year and haveSo not only does this mean that you can only
already paid $9,000 in taxes but the governmentcollect this credit once in the 2009 and 2010 tax
says you must pay another $1,000, your taxyears, it means it is a common credit with other
credit of $1,500 means that the government nowenergy efficiency purchases you make (e.g.
owes you $500 and will send you a check.windows, doors, insulation, water heaters).
- If you made $25,000 in a year and haven't paidIn order to claim your tax credit, you will need to
any taxes and the government says you owefile IRS form 5695 along with your taxes.
them $1,000, your tax credit of $1,500 reducesAdditionally, make sure to save all of the relevant
the amount of money you owe the governmentpurchase and installation receipts as well as the
to zero, but they will not give you the remainingsigned Manufacturer's Certification Statement with
$500. Ok, that out of the way, let's discuss howyour tax records. Often these statements are
you can earn that tax credit. When upgrading aavailable online from the manufacturer's web site.
gas furnace, there are generally two components