REPLACE A GAS FURNACE, HEAT PUMP, OR WATER HEATER AND EARN UP TO $500.00 IN FEDERAL TAX CREDITS

Note: This tax credit expired at the end of 2011. The American Taxpayer Relief Act of 2012 retroactively renewed this tax credit effective January 1, 2012, expiring again on December 31, 2013.  Any qualified equipment installed in 2012 or 2013 is eligible for this credit. As in previous years, the cumulative maximum amount of tax credit that can be claimed by a taxpayer in all years combined is $500. If a taxpayer has already claimed a tax credit of $500 for purchases made in any previous year, they are ineligible for additional tax credits for any new equipment purchases.    



This credit applies to energy efficiency improvements in the building envelope of existing homes and for the purchase of high-efficiency heating, cooling and water-heating equipment. Efficiency improvements or equipment must serve a dwelling in the United States that is owned and used by the taxpayer as a primary residence. The maximum tax credit for all improvements made in 2011, 2012, and 2013 is $500. The cap includes tax credits for any improvements made in any previous year. If a taxpayer claimed $500 or more of these tax credits in any previous year, any purchases made in 2011, 2012, or 2013 will be ineligible for a tax credit. 




Heating, Cooling and Water-Heating Equipment 
Taxpayers who purchase qualified residential energy-efficient property may eligible for a tax credit. The credit is equal to the full cost of the equipment up to the following caps:

Advanced main air circulating fan: $50

Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150

Electric heat pump water heater with an energy factor of at least 2.0: $300

Electric heat pump which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300

Central air conditioner which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300

Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300

Background
The Energy Policy Act of 2005 established the tax credit for energy improvements to existing homes. The credit was originally limited to purchases made in 2006 and 2007, with an aggregate cap of $500 for all qualifying purchases made in these two years combined. There were also separate individual caps for the different equipment types. The Energy Improvement and Extension Act of 2008 (H.R. 1424: Div. B, Sec. 302) of 2008 reinstated the credit for 2009 purchases and made other minor adjustments. The American Recovery and Reinvestment Act of 2009 further extended the credit to include improvements made in 2010 and replaced the $500 aggregate cap with a $1,500 aggregate cap for improvements made in 2009 and 2010. This credit was again renewed in 2010 for improvements made in 2011, but the credit was reduced to its original form and original cap of $500.

This credit was unavailble for purchases made in 2012. The American Taxpayer Relief Act of 2012 retroactively renewed this tax credit effective January 1, 2012, expiring again on December 31, 2013. 

Geothermal heat pumps were originally eligible for this credit, with a $300 cap. However, geothermal heat pumps are now eligible for the residential renewable energy tax credit, with no cap.