Using Tax Credit to Get a New Heating System

Have you been putting off getting a new heating system? You may be pleasantly surprised to hear that you may be able to get some help paying for that heater. If you are purchasing an efficient heating system, then you may be eligible for up to $150 in federal tax credits for your new system. While that is not going to cover the cost of a new heater, any little bit helps.

What is the tax credit for a new heater?

The Bipartisan Budget Act of 2018 extended Residential Energy Credits. This allows you to get tax credits for installing new, more efficient equipment including heaters.

Why does the government give a tax credit for heaters?

Residential Energy Credits are designed to encourage homeowners to upgrade their current household equipment with more efficient equipment. Furnaces are notorious for their high energy usage. Improving the efficiency of your heating system can reduce your energy consumption. This is good for the environment and your wallet!

What form do I use to claim the tax credit?

You use IRS Form 5695 to claim a residential energy credit

How do I claim the credit?

Form 5695 is dedicated to Residential Energy Credits. For your home, you will need to fill out the nonbusiness energy property credit section. You claim for the year that the furnace was placed in service, not the year it was purchased.

What counts toward the credit?

In addition to the cost of your furnace, you may be able to use additional costs when determining the amount of your tax credit. Those costs include things such as the labor costs for installation. Once you have filled out Form 5695, you will get a total for your nonbusiness energy property credits. You enter that amount on your 1040.

Who can claim the credit?

You have to be a homeowner in the United States. Only existing homes, not new construction, fall under the credit. You can claim the credit for vacation or other second homes. You also have to get a written certificate from the manufacturer stating that the equipment qualifies for the credit.

Do any other appliances qualify for the credit?

Yes. In addition to furnaces, you may be able to get credit on air conditioning systems, boilers, biomass stoves, and water heaters. However, there is a $500 lifetime limit for the credit.

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