If I bought 2 qualifying air conditioners, shouldn't I get 2 $600 credits?

[jniner]

I listed the total cost of both units. Turbo Tax is only giving one credit.

[DoninGA]

The credit for an A/C unit is capped at $600 regardless of how many units you purchased.

[Doninflorida]

The IRS instructions say the credit is limited to $600 per item.  If you installed 2 separate systems (with each one having an air handler and condenser), doesn't this mean that you have installed 2 "items" and the credit should be $1,200?

[AmeliesUncle]

---

@Doninflorida wrote:

The IRS instructions say the credit is limited to $600 per item. 

---

Where do you see that?

https://www.irs.gov/instructions/i5695#en_US_2023_publink[phone number removed]

[Doninflorida]

Here are 2 screen shots.  (1) IRS instructions for Form 5695. (2) Separate IRS instructions for the energy efficient home improvement tax credit.  Both documents use the terminology that the credit is "limited to $600 per item".

[Doninflorida]

Here's the second screen shot.

[Opus 17]

There is a bit of a glitch here.

However, first note that only "central A/C" qualifies, not mini-splits or window units even if they are efficient.  And you must install the property (A/C) in a home that you own that you use as a residence (but does not have to be your main residence).  So you only qualify for 2 $600 credits if you installed central A/C on two different homes that you use as residences.

Some energy improvements only qualify if they are made to your "main home" and you can only have one main home per year.  However, this limit is not imposed on central A/C systems.  And the law says the $600 limit is "per item".

https://www.law.cornell.edu/uscode/text/26/25C

The instructions for form 5695 have a section for "Married taxpayers with more than one home" which indicates that if two married taxpayers live apart and each has a separate main home, they each qualify and should file 2 separate form 5695, one for each home.  However, these instructions seem too restrictive, as the requirement that married spouses must live apart in different main homes only applies to the credits on lines 17-20 (Qualified Energy Efficiency Improvements) but the "main home" limit does not apply to the credits on lines 21-32 (Residential Energy Property Expenditures).

In short, form 5695 and its instructions do not cover the situation where a single taxpayer has two homes, or where a married taxpayer has two homes but the spouses don't live separately.  The credits on line 21-31 should (in my opinion) be $600 per home for central AC, if you installed central AC in two different homes that you use as residences, whether you are single or married.

I don't know if you can get this credit using Turbotax.  I don't know if Turbotax will prepare two copies of form 5695.  You may have to prepare your tax return manually, or see a pro.  Possibly you could use Turbotax Full Service to engage a CPA to help you out.

What you need to do is to include 2 copies of form 5695 with your return, one for home A and one for home B.  Put the address of home A on form A line 21c, and the AC credit on line 22a-b, and put the address for home B on line 21c of form B, and the AC credit on line 22.  On the dotted line to the left of line 30 on both forms, enter “More than one main home.”  Then carry the total credits to Schedule 3 line 5b.

But I don't know if Turbotax can be made to do this for you correctly. 

[Doninflorida]

Thank you for the detailed explanation.  The IRS instructions are very poorly written in this area and do not cover the situations that you described.  In my situation I only have one home.  Due to its size, the home has two central air conditioning systems.  Each system has its own air handler inside the house and a condenser outside.  From your explanation, it seems that the IRS considers both systems installed together in a single taxable year to be one unit and therefore the credit is limited to $600.  However, for anyone else reading this explanation and contemplating the purchase of central AC, it seems to me that there is a strategy that would produce a $1,200 credit.  Simply have one central AC system installed in December of the taxable year and install the second system a month later in January of the following taxable year.  Doing so would produce a $600 credit in one taxable year and another $600 credit in the following year.  I believe the way that the law is written, or maybe the way the Treasury Department is interpreting the law, this suggested strategy is totally legal and makes economic sense to do so. Many times, the IRS will issue Treasury Regulations that interpret the law under various scenarios.  I could not find any regulations related to this tax credit

[Opus 17]

@Doninflorida 

You are correct that installing equipment in two different years would be eligible for 2 different credits, this has always been the case.   What is new with the Inflation Reduction Act is the removal of the lifetime cap.  The A/C credit used to have a cap of $200 per year and $500 lifetime.  Now it is $600 per year with no lifetime cap, so the idea of splitting the job between years becomes a more useful strategy.

However, the property must be claimed when installed, not when it is convenient to do so.  If the property was installed in 2023, you must claim both items on your 2023 return.  If you lie and claim one in 2024 and get audited, you will lose because that is clearly against both the instructions and the law.  

In the case of a very large home with two A/C systems, the language "each item" in the law would seem to indicate that you are eligible for $1200.  However, the form is designed to only allow $600.  What you need is a way to claim $1200 in 2023, then you get audited, and if the IRS rules against you, you go to Tax Court and argue that the forms and instructions are incorrect because they disagree with the law (the law controls--if the regulations or instructions are in conflict with the law, the law is supposed to control).  

You might (this is not advice) list one AC on the AC line and list the other on the "boiler/furnace" line.  That would get you $1200.  Then, if audited, you would need to make your case that even though you listed the property on the wrong line against the instructions, the result was correct according to the law.  This strategy poses a certain amount of risk, and I would suggest checking with your own hired tax professional.  

[AmeliesUncle]

That is interesting, but if you look at the Instructions for line 22a, it shows a maximum of $600 (total).

"Don't enter more than $600 on line 22b".

https://www.irs.gov/instructions/i5695#en_US_2023_publink[phone number removed]

[Opus 17]

---

@AmeliesUncle wrote:

That is interesting, but if you look at the Instructions for line 22a, it shows a maximum of $600 (total).

---

Yes, but per section 25C, the form is wrong.  See also the instructions under "Married taxpayers with more than one home" which allows two $600 credits using 2 forms, in certain cases when there are two homes involved.  

The bottom line is the law says the credit is $600 "per item", and the instructions incorporate one fact pattern where two $600 credits may be claimed, but does not incorporate other fact patterns where two credits are allowable under the law, at least in my opinion.  (For example, here the taxpayer has two units in their home.  The law says $600 per unit, not $600 per home.)

The question of how to claim two $600 credits when the law allows it but the form does not, is most properly left to a CPA or enrolled agent.  But it seems to be allowed.  

[AmeliesUncle]

---

@Opus 17 wrote:

---

---

Yes, but per section 25C, the form is wrong.  See also the instructions under "Married taxpayers with more than one home" which allows two $600 credits using 2 forms, in certain cases when there are two homes involved.  

The bottom line is the law says the credit is $600 "per item",

---

Perhaps you are right.

In my opinion, the commas in §25C set it as $600 total.  It says the credit in (a)(2) is limited to $600.  The "item" is per "category".  But perhaps I am wrong (I am excessively tired at the moment, so I may need to rethink things later ... I try to to look at this situation later).

§25(f) has separate rules for separate "dwelling units".  But this situation seems to be for ONE "dwelling unit", so that does not apply.  That means according to the Form Instructions for line 22a, $600 is the maximum.

[Opus 17]

@AmeliesUncle 

25Cf2 is in regards to joint ownership.  For example, a boiler installed in a two family home where each family owns their own unit.   It doesn't seem to apply to (or limit) the case where one person owns two home and installs a system in each home, or where one person owns a large home that requires two separate systems.

I suppose it could be argued that Congress meant to allow one "system" per home, and that if you have a very large house that requires two condensers and two evaporators, that is one central air conditioning "system".  But the law doesn't say system, it says "item."  Or it could be argued that "per item" really means "per category".  But if you ever read any appellate court decisions, you will find that when the words mean something, they mean what they mean.  Only when the word are ambiguous do courts sometimes turn to intent.  I think it could be argued that "per item" means "per item" and if Congress had wanted to say "per category" or "per system" they could have done so.

Anyway, all this falls back to the fact that any taxpayer can't claim two AC units in Turbotax, because Turbotax follows the forms, even if they are (possibly, arguably) incorrect.  The taxpayer would have to find some other way to circumvent the form and claim two credits and take the risk of what happens next.

[AmeliesUncle]

---

@Opus 17 wrote:

@AmeliesUncle 

25Cf2 is in regards to joint ownership.  

I suppose it could be argued that Congress meant to allow one "system" per home, and that if you have a very large house that requires two condensers and two evaporators, that is one central air conditioning "system".  But the law doesn't say system, it says "item."

---

If you look at §25(f)(2)(A) and (B), you'll see it is referring to "dwelling units".   I don't see how §25(f) applies to this situation.

You might be right.  I'll need to think about it and research it further.  However, the Instructions for line 22a indicate it is a $600 limit, so unless there is compelling evidence otherwise, it is difficult to argue against that.   Intuit programs TurboTax things according to the IRS Instructions and Publications, rather than tax law, so it could be wrong.   The Instructions have been know to be wrong before, so you could be right.

[Doninflorida]

Thanks to everyone that gave comments on this.  For me, the good news is that my air conditioners were both installed in 2024 and I am trying to get to the correct tax answer for the 2024 return.  I suppose it is possible that the IRS will clarify the instructions for 2024 and possibly revise Form 5695.  If not, I think the safe option is to file the 2024 return on TurboTax with a $600 credit and, if the IRS changes this treatment within 3 years, file an amended return to get the additional $600.