by Brenda Schafer MSA, CPA, CFP, EA
The Tax Institute at H&R Block

Thank you, Congress. My husband and I recently became the proud owners of a new energy-efficient heat pump and variable furnace. We love it, but we also love the fact that we’ll get to claim a $1,500 tax credit when we file our 2009 return. (We also qualified for an $850 rebate from our local energy company, but I hate to brag.)

As happy as I am, I do want to give a shout out to all of you who made energy improvements like windows, doors and heat pumps last year, just to find out that that energy credit wouldn’t be available for 2008. (You’re not thanking Congress, would be my guess.) It’s very rare that a tax break is dropped for a year and then brought back for two. So, think of it as being part of history.

Fortunately for me, the old air conditioner and furnace held out through last year. Barely. Fortunately, too, I didn’t let my husband replace the system last summer when it became obvious that it was on its last legs. Knowing that we’d be spending the money, you gotta know that I took special note earlier this year when Congress proposed not only bringing the credit back but increasing it from $500 to $1,500. Shortly afterward, the American Recovery and Reinvestment Act was signed into law.

Here are some answers to questions you may be asking yourself:

How much did you spend?
About $12,000, including the heat pump, furnace, whole house humidifier, and some other bells and whistles.

Did you spend more than you would have if you hadn’t qualified for the credit?
I don’t think so. We wanted to put in a really good system that we’d be happy with for many years.

Has your electricity bill gone down?
Too early to tell. I’ll let you know later in the summer.

Are you planning any other energy efficient improvements to your house?
I’d like a tankless water heater. They’re energy efficient and we wouldn’t run out of hot water every time one of our teenagers takes a shower.  They’re kind of expensive (teenagers and tankless water heaters), so it may not happen this year.

Have you changed your withholding because you’re going to get this great credit?
Actually, no. We could change our withholding, it’s true. The thing is, I don’t know yet if we’ll be claiming our oldest and newly-married daughter, so the energy credit is my cushion in case we don’t.

Planning to qualify for any other fabulous tax breaks this year?
If we do claim our oldest daughter, we’ll get the totally awesome Hope credit for her senior year in college. $2,500. Cha-ching. I need to buy a new car, and if it’s a hybrid we might get the hybrid vehicle credit, too. Up to $3,400 (The size of this credit depends on the vehicle and model year.) And we’ll be able to deduct the sales and excise tax we pay on the new car while we’re at it. Gosh, it’s good to be an American!