Can a homeowner use the entire $1500 limit as a credit toward the installation of one appliance?
Yes. A homeowner may use the entire $1500 in tax credits for installing a single appliance, such as a qualified furnace, air conditioner, heat pump, or hot water heater. What happens if the 30% of the installed costs is less than $1500? The homeowner can “bank” the remaining available tax credit for other qualified improvements. Any single installation that costs more than $5000 will instantly reach the $1500 limit. Does the tax credit apply to the cost of the equipment or equipment plus labor? The tax credit applies to the installed costs of the qualified equipment, which includes labor. What’s the difference between a tax credit and a tax deduction? As a tax credit applies against the taxpayers’ liability. A tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower tax bracket. Tax credits have a greater benefit to a taxpayer. Can a homeowner claim the credit for improvements to a second home? No. The tax credit
