In December, the U.S. House and Senate passed the Middle Class Tax Relief Act of 2010. The bill was promptly signed by President Obama receiving the final approval needed to be passed into law. Among items in this bill, it includes provisions for the extension of the HVAC tax credit for one year.

The extension of the HVAC tax credits however, come with some significant changes. In 2011 homeowners will be eligible for Federal Tax Credits on qualified energy effiency improvements in HVAC as follows:

  • Air Conditioning ($300) - 16 SEER & 13 EER minimum efficiency
  • Heat Pumps ($300) - 15 SEER, 12.5 EER & 8.5 HSPF minimum efficiency
  • Advanced main air circulating fan (Variable Speed or Constant Torque) ($50) - 2% or less of furnace total energy
  • Furnaces ($150) - 95% minimum efficiency

Tax credit certificates will be made available by the manufacturers on qualifying equipment.

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Tax credits vs. Tax deductions.

In general, a tax credit is more valuable than a similar tax deduction. A tax credit reduces the tax you pay, dollar for dollar. Tax deductions, such as those for home mortgages and charitable giving, for example, lower your taxable income. If you are in the 30 percent tax bracket, your income tax is reduced by 30 percent of the value of a tax deduction. But a tax credit reduces your federal income tax by 100 percent of the amount of the credit.

For more information on Federal Tax Credits for Energy Efficiency, click here.

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