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HVAC 25c Tax Credits Extended Retroactively

Published on: March 29, 2013

HVAC 25C tax credits extended retroactively was the result of legislation that President Barack Obama signed into law in January of 2013. The 25C HVAC tax credits had previously expired on December 31, 2011. These tax credit programs now include all qualifying heating and cooling equipment purchased or installed between January 1, 2012 and December 31, 2013. This is great news for home and business owners who thought they missed the tax credits last year or who plan to make energy efficiency upgrades this year.

Energy Efficiency Benefits Everyone

The government provides these tax credits in order to encourage home and business owners to upgrade to more energy efficient HVAC equipment. There is less environmental waste, lower energy consumption and fewer expenses to maintain the equipment. However, the equipment you purchase must meet energy efficiency standards that were in place in 2009. This is the first year that the tax credits were available.

Each type of equipment has a specific rating system that is used to evaluate its efficiency. Heat pumps use the Heat Seasonal Performance Factor (HSPF) and air conditioners use the Seasonal Energy Efficiency Ratio (SEER). HSPF and SEER ratings are calculated by taking the cool or warm air produced by the unit and dividing it by the dwelling’s total energy consumption. Cool and warm air output is measured in British Thermal Units (BTU), while total energy usage is measured in watt-hours.

The Annual Fuel Utilization Efficiency (AFUE) is the rating system assigned to gas furnaces. The AFUE of a furnace is expressed as a percentage. It refers to the amount of fuel the furnace burns to provide heat to a home or business. The 25C tax credits require furnaces to be at least 95 percent energy efficient.

Equipment Eligible for the Retroactive Tax Credit

A $300 tax credit is available on the following equipment:

-Air conditioners utilizing a split system with a minimum 16 SEER rating

-Packaged central air conditioning units with at least a 14 SEER

-Electric heat pumps used for heating and air conditioning must have a combined 8.5 HSPF and 15 SEER

-Packaged combined electric heat pumps need at least an 8.0 HSPF and 14 SEER

-Water heaters using oil, natural gas or propane with a 90 percent or better thermal efficiency rating

-Water heaters using an electric heat pump with a 2.0 or greater energy factor

-A $150 tax credit is available on boilers and furnaces with an AFUE of 95 percent or better that use oil, propane or natural gas to provide heat.

Taxpayers can claim a $50 tax credit for installing a circulating fan with a furnace that uses oil, natural gas or propane. The fan helps to circulate air and prevent overheating near the furnace. However, it can’t make up more than two percent of the furnace’s energy use to be eligible for the tax credit.