Energy Tax Credits Can Make a Big Difference on That HVAC Upgrade Bill

Published on: September 12, 2013

Federal energy tax credits were last available for the 2011 tax year. However, the retroactive reinstatement of the 25C residential energy tax credits allows you to claim the equipment you installed anytime between January 2012 and the end of 2013. There are still a few months left in the year; replace your outdated equipment today and make a big difference on that HVAC upgrade bill! The opportunity officially expires on Dec. 31, 2013.


Here’s everything you need to know to take advantage of energy tax credits in a variety of HVAC categories:

Air-source heat pumps: $300 in energy tax credits. Air-source heat pumps are the perfect energy-efficient alternative to furnaces for residents of the Southeast. The warm climate here requires only moderate heating, which a well-maintained modern heat pump can deliver with up to 400 percent efficiency. This is possible because heat pumps move heat rather than generating it from a combustible fuel source. It essentially works like an air conditioner in the summer and a super-efficient heater in the winter.

  • Split system: Look for at least 8.5 Heating Season Performance Factor (HSPF), 15 Seasonal Energy Efficiency Ratio (SEER), and 12.5 Energy Efficiency Ratio (EER) to qualify.
  • Packaged system: Look for at least 8 HSPF, 14 SEER and 12 EER to qualify.

Central air conditioners: $300 in energy tax credits. The most efficient form of air conditioning is a central A/C system. If a heat pump is not right for your home, look for a high-efficiency air conditioner instead. Any brand is eligible for the energy tax credits if the model is efficient enough.

  • Split system: The system needs to be rated at 16 SEER and 13 EER or higher to qualify.
  • Packaged system: Seek out ratings of 14 SEER and 12 EER or higher.

Furnaces: $150 in energy tax credits. This traditional heating equipment uses forced air to deliver heat to every room. Qualifying furnaces can run on natural gas, oil or propane. All brands are able to qualify as long as the efficiency rating is high enough.

  • Requirements: Furnaces convert combustible fuel into heat energy, but a 100 percent energy transfer is very difficult to achieve. Some of the heat energy escapes with the exhaust expelled outside. To qualify for the energy tax credits, select a furnace that’s at least 95 percent efficient, reflected as 95 Annual Fuel Utilization Efficiency (AFUE).

Boilers: $150 in energy tax credits. These heating units use hot water circulation for baseboard heating, in-floor radiant heating and radiators. Select a boiler that runs on gas, oil or propane from your favorite brand. As long as it’s efficient enough, it qualifies for the federal energy tax credits.

  • Requirements: Look for a boiler with at least 95 percent AFUE to qualify.

Water heaters: $300 in energy tax credits. Water heating accounts for up to one-fourth of your home’s energy consumption, so it really pays off to invest in a more efficient model. Plus with energy tax credits that help dampen your investment, now’s the perfect time to upgrade.

  • Natural gas, oil or propane: Traditional tank water heaters can be powered by these combustible fuels. If you choose any of these fuel types, look for an Energy Factor of 0.82 or greater or a thermal efficiency of at least 90 percent.
  • Electric: Water heaters can also run on electricity. Seek out a model with an Energy Factor of at least 2.0 to qualify.

Insulation: 10 percent of the cost, up to $500 in energy tax credits. Adding extra insulation to the attic of your existing home is a cost-effective way to lower your energy bills. Now’s the time to upgrade and save, thanks to the energy tax credits.

  • Requirements: Rolls, batts, blown-in fibers, rigid boards, pour-in-place and expanding spray insulation all qualify. Products meant to seal air leaks also qualify, as long as they include a Manufacturer’s Certification Statement. These products include caulk, weatherstripping, house wrap and canned spray foam. The tax credit amount does not include the cost of installation.

Applying for Tax Credits

Once you’re confident you have selected a product that meets the requirements, you need to apply for the tax credits; you will not automatically receive them. Fill out the 2013 version of IRS Form 5695. The information from this form transfers to line 52 on Form 1040. Submit both documents and any other pertinent tax information with your returns, which are due to the IRS by April 15, 2014. Talk to your tax accountant about how to retroactively claim the credits for qualifying 2012 upgrades.

To learn more about qualifying for these lucrative energy tax credits, please contact AirConditioningSouthEast.com today. Our contractors in Florida, Georgia, Mississippi, South Carolina and Alabama can answer your remaining questions.