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Does Your Heat Pump, Furnace, or Air Conditioner Qualify for the Federal Tax Credit?

If you have recently bought a brand new air conditioner, heat pump, or gas furnace for your residential property, you may be eligible for a federal tax credit. However, please note that this tax credit is only applicable if the upgrades are installed in your existing home, the one you reside in permanently. New constructions and rental properties are not eligible for this tax credit. It is important to keep in mind that the purchased upgrades must be installed between January 1, 2023, and December 31, 2032, to be eligible for this tax credit. Other energy-efficient home improvements may qualify; for further details and annual limits, you can visit Energy Star Tax Credits for Homeowners.

Air Conditioners

SEER2 ≥ 16

You can claim 30% of the project cost, up to a $600 maximum credit. The air conditioner must meet the ENERGY STAR efficiency requirements with a SEER2 ≥ 16 or higher.

Gas Furnaces

AFUE > 97% or higher

You can claim 30% of the project cost, up to a $600 maximum credit. The air conditioner must meet the ENERGY STAR efficiency requirements with an AFUE > 97% or higher.

Heat Pumps

EER2 > 10

You can claim 30% of the project cost, up to a $2,000 maximum credit. The heat pump must meet the ENERGY STAR efficiency requirements for Cold Climates with an EER2 > 10 or higher.

Mini-Split

SEER2 ≥ 16, EER2 ≥ 9, HSPF2 ≥9.5

You can claim 30% of the project cost, up to a $2000 maximum credit. The ductless mini-split must meet the ENERGY STAR efficiency requirements with SEER2 ≥ 16, EER2 ≥ 9, HSPF2 ≥9.5 or higher.

Electrical Components

You can claim 30% of the project cost, up to a $600 maximum credit.

Must support your installation of residential energy property, including panelboards, sub-panelboards, branch circuits, and feeders. Meet the National Electric Code and have a capacity of 200 amps or more.

*Please keep in mind that the information above about the eligible equipment for the tax credit is the most up-to-date available. The eligible equipment you install must meet or exceed the highest efficiency tier (excluding any advanced tier) established by the Consortium for Energy Efficiency at the beginning of the calendar year. It is important to note that the eligibility requirements are subject to change based on the final CEE Criteria and the Internal Revenue Service (IRS).

What are Energy Ratings?

EER2 – Energy Efficiency Ratio, is a measure of the unit’s cooling output during a cooling season. A higher EER2 rating indicates that the air conditioning or heat pump unit is more energy-efficient, which can result in lower energy bills and a reduced environmental impact.

SEER2 – Season Energy Efficiency Ratio, is a measure of how efficient a central air conditioning system is during a cooling season. It indicates the amount of cooling that the system can provide per unit of energy consumed. Unlike an EER2 rating, a SEER2 rating takes a range of temperatures into consideration and factors seasonal temperature fluctuations into the calculation. A higher SEER rating means that the system is more efficient. 

HSPF2 – Heating Seasonal Performance Factor, is a measure of a heat pump’s efficiency in producing heat, especially in colder temperatures. It stands for Heating Seasonal Performance Factor 2, and is calculated by dividing the total heating output of the heat pump by its energy consumption over the heating season. A higher HSPF2 rating means that the heat pump is more efficient, which can lead to savings on heating costs.

AFUE – Annual Fuel Utilization Efficiency, is a measure of a furnace’s efficiency in converting fuel into heat during a heating season. It is expressed as a percentage, with higher percentages indicating higher efficiency. For example, an AFUE rating of 90% means that 90% of the fuel consumed by the furnace is converted into heat, while 10% is lost.

How to Apply for the Energy Efficiency Federal Tax Credit

To claim an energy-efficiency home improvement tax credit, fill out and file your tax return with IRS form f5695. The IRS administers tax credits, and the credit amounts you may receive are subject to IRS regulations. Therefore, we highly recommend consulting a tax professional for advice on tax preparation and your tax credit eligibility. For more information and instructions for this tax credit, visit Form 5695, Residential Energy Tax Credits.

*Please note that the tax credit information provided on this website is for informational purposes only. It should not replace the advice from a tax professional or the Internal Revenue Service (IRS). The information is subject to change, and McDowell & Son cannot guarantee accuracy. For the most updated information on the federal tax credits, visit energystar.gov or IRS.gov.

To qualify your heat pump, air conditioner, or furnace for the federal tax credit, talk to your local HVAC contractor, such as McDowell & Son, before investing in a system!

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