Consumer Tax Incentives - Home Heating & Cooling Equipment

What are the incentives for home heating & cooling equipment?

Purchasers of highly efficient heating, cooling, and water heating equipment can take tax credits of up to $300 for purchasing qualifying equipment, as detailed below. These credits are available for systems placed in service from January 1, 2009, through December 31, 2009. There is a $500 cap on the credit per home, including the amount received for insulation, windows, air and duct sealing as described in the previous section.

Read an IRS summary of the credit here

What types of equipment qualify and for how much?

  • High-efficiency gas, oil, and propane furnaces and boilers: $150
  • High-efficiency central air conditioning units, including air-source heat pumps: $300
  • NEW - Ground-source or geothermal heat pumps
  • NEW - Biomass Stoves - $300
  • High-efficiency fans for heating and cooling systems: $50
  • High-efficiency water heaters, including heat pump water heaters: $300

Where must the equipment be used?

Under guidance issued by the IRS, equipment is eligible if installed in a home occupied by a taxpayer as their principal residence at the time the equipment is installed. This implies that equipment in new homes is generally not eligible since in new homes equipment is generally installed prior to occupancy. However, efficient equipment in new homes will help that home qualify for the new home tax credit.

What are the efficiency requirements to qualify for the credits?

Manufacturers and retailers should be able to help you tell whether a specific product qualifies.

The qualification specifications are:

  • Furnaces and boilers: Annual Fuel Use Efficiency (AFUE) 95 or higher
  • Central air conditioning units:
    • Central air conditioning units must meet the highest tier standards set by the Consortium for Energy Efficiency (CEE), which require a Seasonal Energy Efficiency Ratio (SEER) of 15 and an Energy Efficiency Ratio (EER) or 12.5 for split systems (those with separate indoor and outdoor units) and SEER 14 and EER 12 for single-package systems (typically located on a roof). SEER measures performance throughout the cooling season, EER measures performance on a very hot day.
  • Heat Pumps
    • Air-source heat pumps must have a Heating Seasonal Performance Factor (HSPF) 9 or greater, SEER 15 or higher, and EER 13 or higher
    • Ground-source heat pumps
  • Biomass Stoves: Stoves must have a thermal efficiency of 75%, and be used to heat a dwelling unit or heat water for use in the same. The law defines biomass fuel as anything from agricultural crops, trees, wood wastes & residues to pellets, plants, grasses and fibers.
  • Fans for heating and cooling systems: fan uses no more than 2% of total heating system energy use, as defined by DOE test procedure. For more information, see the Gas Appliance Manufacturers Association website.
  • Water heaters:
    • Gas or propane water heaters—Energy Factor of at least 0.8, or a thermal efficiency of at least 90%. The only models that meet this standard currently are tankless water heaters and some systems that combine both space and water heating.
    • Heat pump water heaters—Energy Factor of at least 2.0.

What do I need to do to qualify for the incentives?

Under the IRS rules, manufacturers need to certify that specific measures are eligible. Homeowners should obtain a copy of this certification when buying these products from the manufacturer, contractor or retailer. Certifications need not be submitted to the IRS, but should be kept on file in case the IRS has questions. Homeowners should also make notes on when each eligible measure is installed- only measures "placed in service" in 2009 are eligible.

Click here to access IRS guidance on qualifying energy-efficient property.

To apply for the incentive, use IRS form 5695.

Where can I find out more about qualifying products?

Taken From: Tax Incentives Assistance Project (TIAP)