Tag Archives: $1500 tax credit

Deciding To Repair Or Replace Your A-C System When Money Is Tight

To stay current on trends, we monitor several air-conditioning and heating industry blogs and HVAC email lists.  In them we are reading that a lot of homeowners are asking their local service company to do just the bare minimum to keep their AC or heating system running.  In recent blogs, we have written on related topics, such as:

a- Initial installation cost may not be highest cost item of owning a heating and air conditioning system over its life. It could be electricity/fuel costs or even a combination of maintenance and repair costs. 
b- Alternative sources of financing, such as a local community-chartered credit union. In those, a person does not have to work at a job related to the credit union. Rather it is based on residency or some easy-to-meet requirement.
c- $1,500 Tax credits, manufacturer or utility rebates or financing for purchasing a new a/c and heating system.

Given the current squeeze on household budgets, the request to avoid a major purchase or to minimize cash outlay is certainly understandable.   Of course, if someone is requesting the minimum repair, chances are they are not calling for service until their system fails to cool or heat properly.  However, If the system is old enough that replacement parts can no longer be sourced, or if a major component such as a heat exchanger or AC compressor has failed, even the minimum repair estimate may large enough to cause a cost/benefits dilemma with your current system.

When facing a major repair or even a modest service work on an older heating and AC system (generally, 10 years is considered old, especially in regards to efficiency), we are listing: 

Seven Useful Questions For Repair Or Replacing Your A-C Heating System

1- How long do you plan to own your home or building?
2- How much have your repair bills averaged costing over the past 1-2 years?
3- Do you believe electricity and fuel costs will tend to go down, stay the same, or go up?
4- What other repairs might you be facing in the near future, other than the issue at hand right now?
5- How much would you save on your monthly utility bills in electricity and gas costs with the new system?
6- How much are the total rebates and tax credits available on a new system?
7- How many months will it take to pay back the cost of the new AC and heating system? After that initial payback period, how much will I get in return each month as a return on my investment?

If there is literally nowhere to turn for the funds to give you a choice, then you may only have to keep your cash outlay as low as possible. However, if you do have choices, making the decision to go with more efficient equipment could pay a monetary return of and on  your investment.  Your local HVAC service company should be able to answer questions 4, 5, 6, and 7.  With these, you should then be able to make a well informed decision.  We welcome your comments and experiences.

 

Tax Credit of $1,500 For New Heating and Air Conditioning Systems

As a provision of the American Recovery and Reinvestment Act of 2009, homeowners can now receive up to $1,500 in tax credits when they install qualifying high-efficiency heating and AC  equipment into an existing home.

Difference in a tax credit and tax deduction
Before going further, we will point out that this is a tax credit, not merely a deduction. Basically, a deduction reduces the amount your tax bill is calculated from. A tax credit offsets the amount of taxes you owe.  In all cases, talk to your tax advisor before taking action.

The act allows 30% of the amount invested for qualifying equipment and during specific dates in calendar 2009 and 2010, up to a maximum credit of $1,500.  This means that qualifying expenditures can be up to $5,000.  Although the focus in our blog is on HVAC equipment, the total credit also applies to certain types of energy efficient windows, doors, insulation, solar water heaters and other energy saving items.  At the risk of belaboring the point, one credit covers all these categories, not one credit per category.

Special provisions for geothermal heat pumps
If you are considering a geothermal heat pump (or solar water heater) we are hearing that there are some extra stimulus incentives, including higher allowances and more years to qualify.  Ask your tax adviser and contractor for the details.

Get the details in writing
In reading air conditioning and heating industry news and blogs, there is some confusion over which replacement equipment qualifies (or which efficiency standard to rely upon) for the efficiency standards of the act.  This is not unusual for the early stages of a new tax credit and the complexities of the U.S. tax code.  Because of this, we advise you to get the details in writing from your contractor or tax advisor as to whether (or not) any purchase you are considering qualifies for the tax credit.

Our wish is that you enjoy more comfort, lower energy usage, and lower monthly bills.