Now that 2011 is underway, there is some good news about tax credits for HVAC equipment. For the past few years, tax credits of up to $1,500 were available for consumers who installed qualifying energy efficient HVAC equipment. Up until the end of 2010, consumers may have been eligible for a tax credit equal to 30% of the cost of qualifying energy efficient HVAC equipment including heat pumps, furnaces, and central air conditioning units.
The $1,500 tax credit was a great incentive for consumers to install energy efficient HVAC equipment. The tax credit was a dollar for dollar reduction the tax owed which is much better than a tax deduction which is a reduction in gross income. With a deduction, your tax savings depends on the tax bracket you are in. The higher the tax bracket, the greater the savings.
These tax credits were due to expire at the end of 2010 and for awhile it appeared that they would not be renewed for 2011. Fortunately, in late December the tax credits were renewed instead of being allowed to expire, but they are significantly reduced for 2011.
Starting in 2011, the tax credit for energy efficient HVAC equipment is calculated at the rate of 10% of the cost of qualifying HVAC equipment and it is capped at a total of $500. Certain central air conditioners and heat pumps qualify for a credit of up to $300. Costs of qualifying natural gas furnaces are eligible for a credit of up to $150, and qualified advanced main air circulating fans are eligible for a $50 credit. While the 2011 tax incentives are not as generous as in previous years, they are certainly worth looking into if you are in the market for energy efficient HVAC equipment.
