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HVAC tax credits: they're back!

Jeffrey Anderson | Improvement Center Columnist | March 14, 2013

Benjamin Franklin is allegedly the one who said, "In this world nothing can be said to be certain, except death and taxes." But while you can't avoid the former, you can sometimes get a bit of a break on the latter.

The dreaded fiscal cliff also seemed almost certain in December 2012, but it ended in a deal on January 2, 2013 -- a deal that can save you some money on your taxes. Some residential energy tax credits have been extended: If you upgraded your HVAC system in 2012 to one that's more energy-efficient -- or plan to this year -- you may be eligible for a credit when filing your taxes.

Energy tax credits: what you need to know

The majority of the federal energy tax credits that were introduced in 2006 as an incentive for families to make their homes more energy-efficient expired in 2011. The American Tax Payer Relief Act of 2012, which was signed into effect in January, reinstates many of the most popular credits. The Bill stipulates that tax credits may be taken for eligible energy-efficient upgrades done to your home in 2011 through December 31, 2013.

Heating and cooling equipment that may qualify

There are a number of conditions that must be met to qualify for the federal energy tax credits. The HVAC upgrades have to be in your principle residence -- vacation homes and rental properties aren't eligible. In addition, the heating and cooling equipment has to have been installed in your home between January 1, 2011, and December 31, 2013.

One exception is adding a geothermal heat pump: an installation between January 1, 2009 and December 31, 2016, may qualify for the credits and second homes are also eligible for the program. The government's Energy Star website offers the following eligibility guidelines for various types of HVAC equipment:

  • Split type central air-conditioning systems -- The unit must have a SEER rating of 16 or higher and an EER rating of 13 or higher. Approved systems may be eligible for a $300 tax credit.
  • Package type central air-conditioning systems -- The system needs a SEER measurement that equals or exceeds 14 and an EER rating of 12 or higher. You may qualify for a $300 credit with an approved system.
  • Split type air-source heat pump systems -- Install a system with a SEER rating equal or greater than 15, an EER that meets or exceeds 12.5, and an HSPF of 8.5 or higher. Qualifying systems may be eligible for a $300 tax credit.
  • Package type air-source heat pump systems -- Look for equipment with a SEER measurement of 14 or higher, an EER that meets or exceeds 12, and an HSPF ratio equal or greater than 8. Approved equipment may be eligible for a $300 tax credit.
  • Furnaces and boilers -- An AFUE measurement of 95 or higher is required to qualify for the program. Approved furnaces and boilers may be eligible for a $150 tax credit.
  • Biomass stoves -- The stove must burn an approved fuel and be used for heating your home or water. To qualify, the stove must have a thermal efficiency of at least 75 percent as tested using a lower heating value. An approved stove may qualify for a $300 tax credit.
  • Geothermal heat pumps -- Qualification is determined by what Energy Star requirements are in effect at the time of purchase. An approved system may be eligible for a credit of up to 30 percent of the material and labor costs involved in the installation.

The Energy Star website provides a list of approved equipment in some categories, but in others you'll need to rely on the expertise of an HVAC contractor.

heating and cooling terms

How to apply for the HVAC energy tax credits

The most important document you'll need to apply for your tax credit is the Manufacturer's Certification Statement. This certification verifies that the equipment meets the government's energy efficiency guidelines and should be provided by your HVAC contractor. Applying for a credit for a geothermal heat pump installation also requires labor and equipment receipts.

In most situations, you'll need to submit an IRS form 5695 with your tax forms to claim your credit. However, consulting with a tax accountant to ensure you're doing it properly is highly recommended.

One consideration to keep in mind: the maximum energy tax credit available to families is $500 under the new bill and it's retroactive back to 2006. If you have already received credits for upgrades done in prior years, you may not be eligible or you may be eligible only for the difference between what you've already received and the maximum of $500.

About the Author

Jeffrey Anderson has a Degree in English from V.M.I., and served as an officer in the Marine Corps. He worked in Residential and Commercial construction management for 25 years before retiring to write full time. He spends his time writing, remodeling his old farmhouse, and in animal rescue.