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Tax Credits

Tax Credits for qualifying heating and air conditioning systems are again available

Though in no way am I an expert on federal taxes, I can report that as of August 16, 2022, the federal government has re-instated tax credits available on energy star rated furnaces, air conditioners, heat pumps and hot water tanks. 

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 again. But, if you are in the market for new equipment credits are available to you.

As had been the case, 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 should be able to claim the credit on this years tax return if in fact you have had qualifying equipment installed last year.

With this credit available until the end of 2032, combined with incentives from the utility companies and manufacturer rebates, this will be a great year to replace your aging heating or cooling system.

For more information see your tax advisor or read “Instructions for Form 5695” from the IRS.

You can also find information on the Energy STAR website.