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dawn108
New Member

What would the reason be for not getting the entire home energy credit of $500?

We spent $16,580 on a qualified central air conditioning/furnace but are only showing a credit of $150.
3 Replies
KathrynG3
Employee Tax Expert

What would the reason be for not getting the entire home energy credit of $500?

The home energy credits have been reduced over the years and there are limits within each category, as well. The Nonbusiness Energy Property Tax Credit furnace category maximum is $150 even though the maximum deductible is $500 for all categories and all years since 2006.

 

For more details, see Energy Tax Credit: Which Home Improvements Qualify?

2020 IRS Form 5695 Residential Property Tax Instructions, page 2

Opus 17
Level 15

What would the reason be for not getting the entire home energy credit of $500?

Although the overall limit for the Nonbusiness Energy Property Credit is $500, there are various sub-limits for different kinds of improvements.  The $500 limit is also your lifetime maximum, did you claim the credit in a past year for any purpose?

 

The sub-limit for an efficient air conditioner is $300, and the sub-limit for either a gas or oil furnace is $150.  If you installed both a furnace and an air conditioner, you need to break up the job and report it in both places.  The program asks about them separately, and they go on different lines of the form.

 

If you don't know the cost of the different items, you may need to ask your contractor for a breakdown.  Remember that this credit is limited to the cost of the equipment and does not include installation, site prep, ductwork, or removal of old equipment.  You need to know the price of the furnace and A/C units separately and not including installation.  If your contractor won't provide that information and you guess, you may be at risk in an audit since the IRS does not have to give you any credit you can't prove to their satisfaction. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

What would the reason be for not getting the entire home energy credit of $500?

And if this was an electric heat pump that does both heating and cooling, it get's listed as a heat pump, not a furnace and the credit maximum is $300. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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