Take Advantage of the HVAC Federal Tax Credit Before December 2021

Key Points

Learn what the federal energy tax credit is and how to take advantage of it.

 

You still have time to take advantage of the federal tax credit when replacing your HVAC system. At the first of the year, the government extended the previously expired tax credits on residential air conditioning equipment. This means that certain qualifying air conditioners and heat pumps installed through December 31, 2021, are eligible for a $300 tax credit.

The tax credit also retroactively applies to new air conditioners installed in the 2018-2020 tax year. If you have not previously claimed the Nonbusiness Energy Property Tax Credit, consult with your tax professional for details when you file for your 2021 return.

What Is A Federal Energy Tax Credit?

The Further Consolidated Appropriations Act 2020 amended Internal Revenue Code section 25C, which provides a tax credit for the purchase and installation of Qualified Energy Property, which includes residential heating and cooling equipment that meets certain energy efficiency requirements. 

There are several important requirements and limitations homeowners must meet to qualify for the section 25C tax credit, such as the Qualified Energy Property must be installed in the homeowner’s primary residence. Also, you won’t qualify for the credits without a copy of the manufacturer’s certification statement to show the efficiency ratings of the system.

Does My New AC System Qualify?

Air conditioners meeting the following requirements are eligible for a $300 tax credit:

• Split Systems must have a SEER (Seasonal Energy Efficiency Ratio) of greater than or equal to 16, and an EER (Energy Efficiency Ratio) of greater than or equal to 13.
• Packaged Systems must have a SEER of greater than or equal to 14, and an EER of greater than or equal to 12.
• Air conditioners with the designation of ENERGY STAR Most Efficient meet the tax credit requirements.

Heat pumps meeting the following requirements are eligible for a $300 tax credit:

• Split Systems must have an HSPF (Heating Seasonal Performance Factor) of at least 8.5, an EER of at least 12.5, and a SEER of at least 15.
• Packaged Systems must have an HSPF of at least 8, an EER of at least 12, and a SEER of at least 14.
• ENERGY STAR certified heat pumps meet the tax credit requirements.

Does My Home Qualify?

The $300 tax credit is for energy efficiency improvements to residential properties only, with some restrictions. For instance:

• It only applies to your primary residence, not a vacation home, second home, commercial property, etc.
• It is only for existing homes, not new construction.

How Do I Apply for the Tax Credits?

To claim the tax credits, fill out IRS Form 5695 and file it with your tax returns. Tax credits are administered by the IRS. For questions about how to apply, please contact the IRS or a tax professional.

How Honest Abe Can Assist With Your HVAC System Installation

The Federal tax credit for high-efficiency HVAC systems is an excellent program that you should take advantage of especially if you have an older system. You’re basically being reimbursed for some of the costs of a new system and you will be saving money in the long run because a highly efficient HVAC system costs less to run than other systems.

At Honest Abe, we offer a range of professional services, including new system installations and repairs. We are experts at installing energy-efficient HVAC systems across the DFW area that will ensure you are eligible for the federal tax credit. 

*Disclaimer: The tax credit information contained within this website is provided for informational purposes only.

 

By Leslie Radford