You should fire your accountant! I can't believe anyone who is providing a service as an accountant isn't up to speed on the $1500 tax credit for energy efficiency that everyone has been talking about since its creation!

I'm no accountant, but I can tell you what I know for certain (which seems to be way more than your accountant).

In your case, the $1500 tax credit for heat pumps is actually a tax credit of 30% of the installed cost of your heat pump UP TO A MAX of $1500. For most heat pumps that qualify, 30% will easily hit the max of $1500 and thus you get a $1500 CREDIT on your taxes (not a deduction!). It is a non-refundable credit, meaning if you owe less than $1500 before this credit, you won't get the difference as a refund. It will only take your taxes down to zero. In other words, you get a $1500 credit to the final taxes you owe, but you don't get any additional once you hit zero.

There is no special form required and no proof is even required when you file your taxes. You just have to claim it. You need the documented proof in case you are audited and they ask for the proof. The proof you need is your receipt showing the make and model of your stuff and a printout of the AHRI certification of your specific setup from this site...

http://www.ahridirectory.org/ahridirectory/pages/home.aspx

The certificate will say the combination qualifies for the credit in the upper right, if indeed your combination of equipment qualifies.

That's all there is to it. Feel free to ask if you have any other questions. Again, I would FIRE that accountant!!!

Agreed - he should be fired.

Another case of lying to the citizens by the Obama administration. We now have first hand experience of what it's like to live under a socialist regime.

I took advantage of the program. I installed a system in 2009 that qualified. I do my own taxes. Here is an example $4,000 system comes to 1,200 write off. That means if you were going to get 0 dollars back (you and the gov were completely even) you would get a refund for 1,200. Tax software asks you about it and figures it all out. All you gotta do is plug in the total dollar value. It figures out 30% of up to 5,000. Keep all your receipts in case you get audited, because if you do get audited, and you never replaced your system, that would be considered fraud.

Well, maybe I panic'd but now I am worrying in the other direction. He called this evening to set up a pick up time. My refund was a bit MORE than I expected. He said there was some $800 Obamma rebate (no idea) AND the heat pump rebate of $1800.

Yes $1800. I said the max was $1500...he said he put the figures in and the ccomputer said $1800.

No I have to figure out how he did it I guess.

Thoughts...other than fire him...for now...

Well there is a form, #5695 that must be files...up to him to do it though..but I'll show him the form and see how he comes up with $1800.

It appears he was putting my heat pump in as a geothermal...it straightforward on the 5695 for...the software he says he gets from the IRS must not be as clear.

It appears he was putting my heat pump in as a geothermal...it straightforward on the 5695 for...the software he says he gets from the IRS must not be as clear.

I still say FIRE that guy! If you look on Form 5695, you will see that the maximum credit for air source heat pumps is $1500. Unless you really got a geothermal heat pump (which doesn't have a $1500 cap), you can only get a max credit of $1500.

As for the $800 Obama rebate... he's probably talking about the stimulus rebate Obama gave to everyone. HOWEVER, you should have received that spread out over the course of the year via reduced federal witholdings, not received as a lump sum credit when filing your taxes.

I would make sure he knows what he is doing, because he sure doesn't sound like a knowledgable "accountant". I still say FIRE HIM!

andre

I think responses have about covered competency of your accountant. He is CPA certified?

this is second winter with your heat pump? how has it performed? if you had to go back and start all over, would your decision still be the same?

Best Rgds
TD

1) Yes CPA...never any trouble for years. To a lay person like me, I can see the form 5695 could be confusing if you rush thru it...I can see where someone see 'heatpump' on page two and go from there when in reality it should have been entered on page 1 under: Energy Efficient Building Property. HE SHOULD HAVE KNOWN BETTER....yes. Still, I'll give him the benefit of the doubt on this one. He said the IRS tax software he uses is not forms but more of an interview driven system and he I guess he ended going down the geothermal (wrong) path.

Tiger,

Actually this is the first heating season. I am happy to say the house can actually be mainatined at 70 degrees pretty much iregardless of how could it is outside. The 20 year old unit could not. This one so far appears a bit more efficient too...though the old one could have been broke for all I know though. I am curious to see what spring and a second summer will bring. Surprisingly I expected dramatic drop in the summer but I think I see more of an impact in the winter.

My electric company raised rates 35% in Jan. I opted a competitor to save 10%...well 10% of 70% of my bill anyway (the original utility still collects .30 on the dollar to do paperwork!). My bills have gone up but my usage has gone down a bit and we are warm...can't ask for more especially when the trane unit was $7100, a $900 instant rebate, a $500 local utilty rebate and now the $1500 gov rebate.

At $4200 I think I made the right decison to replace the 20 year old unit.

Junkmailhold said:

For most heat pumps that qualify, 30% will easily hit the max of $1500 and thus you get a $1500 CREDIT on your taxes (not a deduction!). It is a non-refundable credit, meaning if you owe less than $1500 before this credit, you won't get the difference as a refund. It will only take your taxes down to zero. In other words, you get a $1500 credit to the final taxes you owe, but you don't get any additional once you hit zero.

Neo said: Here is an example $4,000 system comes to 1,200 write off. That means if you were going to get 0 dollars back (you and the gov were completely even) you would get a refund for 1,200.

Apparently one of you is right and one of you is wrong. I hope Neo is right. If not, people who are paying more taxes than they need during the year are being penalized for doing so. This cannot be the case.

If I have a refund of $1000 in tax year 2009, I expect to get $1000 + $1500 (the federal tax credit) = $2500 back if I bought a qualifying Energy Star HVAC system that cost $6,000 during 2009.

Someone please tell me this is correct!!!

Hi Burnself,
you have the right idea.
If you expecting a 1,000 refund. And you spend 6,000 on a heat pump that qualified. The max credit is 1,500. So you would get a refund of $2,500.

The non-refundable language can make things confusing but its really simple. Lets say you made very little money in 2009. And you only paid $1,000 in federal tax. Lets say you still managed to install a 6,000 heat pump that qualifies. You would be eligible for 1,500 back. But because you only paid 1,000 total in fed taxes, you would only be eligible for 1,000 and not 1,500. The non refundable means the government won't be you back for money you never paid in (no refund).

Keep in mind this tax credit is just that - a credit. Not a deduction. A credit is much better than a deduction. A deduction only deducts from your income and lowers your the amount you pay taxes on. Where a credit is literally tax credit of up to 1,500 on your tax liablitiy.

I hope this helps.

Burnselk,

I think the key to your confusion is that the amount of tax you pay after you do your taxes is some fixed number regardless of how much your withholdings are during the year. In other words, there are more than a few ways to come out "even" with the fed after doing your taxes such that you pay nothing and get no refund.

1) During the year, $10000 was witheld from your paychecks and after you do your taxes, it shows you owe $10000 in taxes. Net = 0. You owe nothing and they owe you no refund.

2) During the year, $1000 was witheld and after you do your taxes, it shows you owe $1000 in taxes. Net = 0. You owe nothing and they owe you no refund.

In 1) above, the $1500 tax credit would get you a $1500 refund because $1500 is credited against the $10000 in taxes you have to pay resulting in a net of $8500. Since $10000 was witheld, the fed now owes you a $1500 refund.

In 2) above, the $1500 tax credit would only get you a $1000 refund because $1500 is credited against the $1000 in taxes you have to pay resulting in a net of -$500. BUT since it is a non-refundable credit, the fed won't let you keep that extra $500 so the taxes you owe are $0 and not a credit of $500. Since $1000 was witheld, the fed now owes you a $1000 refund.

Hope this makes sense... an example of a refundable credit is the Earned Income Credit. In that case, in scenario 2 above... you would get to keep the -$500 from the credit and your refund would be $1500. But this is NOT the case with the energy credit.

Hope this clears things up a bit...

Thanks Guys, I'm glad you both responded and contributed to helping clarify this for me.

Junkmail, after reading your response again, I'm still confused.

Let me put it this way and ask you to tell me if I should qualify for the full $1,500 tax credit if I paid $5,500 for my Energy Star certified HVAC unit.

I owe $14,000 in federal income tax (from the tax table) and I've already paid $15,000 ($1,000 too much).

Will I get the $1,500 tax credit + my $1,000 for a total of $2,500 as a refund?

Burnselk,

Yes, absolutely you will get the $1500 tax credit added to your refund. You are like my Case 1 above.

Your $5500 unit qualifies for the full $1500 credit.
That $1500 is subtracted from the $14,000 in tac you owe resulting in your owing $12,500.
Since you already paid in $15,000 in witholdings, your refund would be $15,000 - $12,500 = $2,500.

Hope that settles this for you once and for all.

And it did junkmail......thanks. It's now very clear to me.