Though in no way am I an expert on federal taxes, I can report that as of January 2020, the government has tax credits available on Energy Star-rated furnaces, air conditioners, heat pumps and hot water tanks.
The Non-Business Energy Property Tax Credits that ended in 2018 have been retroactively extended from Dec. 31, 2017, through
Dec. 31, 2020. There is a lifetime limit of $500 for this credit, meaning if you have previously claimed the credit since 2005 (up to $500), you will be ineligible to claim it on your tax return. But, if you are in the market for new equipment now or have had it replaced as far back as 2018, credits are available to you.
As had been the case prior to 2018, homeowners are eligible to claim up to 10% of the cost of installing high efficiency equipment with the total dollar amount capped depending on the product installed. For example, the maximum amount a homeowner could claim for a qualified air conditioner, heat pump or hot water heater is $300, with a cap of $150 for qualified furnaces and hot water boilers and a $50 limit for an advanced main circulating fan.
The Qualifying Efficiency Levels for the credit are as follows:
Central A/C (Split-System): >=16 SEER/ >=13 EER or higher
Heat Pump (Split-System): >=15 SEER/ >=12.5 EER/ >=8.5 HSPF or higher
Boilers (Natural Gas/ Oil/Propane): >=95% AFUE
Furnaces (Natural Gas/ Oil/ Propane): >=95% AFUE
Advanced Main Circulating Fan: If the fan uses less than 2% of the furnaces (Natural Gas/ Oil/ Propane) total energy
Water Heaters (Gas, Oil Propane) Energy factor >= 0.82 OR a thermal efficiency of at least 90%.
Electric Heat Pump Water Heater-Energy factor >= 2.2
Now remember, since this is retroactive, you can claim the credit on this year’s tax return if you have had qualifying equipment installed after Dec. 31, 2017.
With this credit available until the end of 2020, combined with incentives from the utility companies and manufacturer rebates, this looks like a great year to replace your aging heating or cooling system.
For more information, see your tax adviser or read “Instructions for Form 5695” from the IRS.
You can also find information on the Energy Star website.