Energy-Efficiency Tax Credit Takes Sting Out of Heating and Cooling Replacements

By Trish Holder

Okay – this isn’t going to help me (it turns out) but it may help you. I hope it does.

Congress recently retroactively reinstated the 25C Residential Energy-Efficiency Tax Credit from Jan. 1, 2012 to Dec. 31, 2013. The credit allows eligible taxpayers to claim up to $500 on their tax returns following the installation of qualified energy-efficient equipment such as home heating and cooling equipment.

It’s not a fabulous tax credit, but it’s better than nothing, particularly if you are facing a replacement anyway – so take note.  Generally speaking, the credit allows eligible taxpayers to claim up to $500 on their tax returns following the installation of qualified energy-efficient equipment.  It’s also retroactive, since the credit expired Dec. 31, 2011.  This means that homeowners who purchased qualifying high-efficiency HVAC or water heating equipment after Dec. 31, 2011 have the opportunity to claim up to $500 of the cost.

I got pretty excited when I read about this newly reinstated credit which I thought might take the sting out of an HVAC replacement which I am facing in a rental property that my husband and I own.  Sadly, this credit does not apply to rental properties, only primary residences.  Figures.  (Perhaps I should count my blessings that the HVAC system in my primary residence, a geothermal heat pump, should not need replacing for hopefully another decade.)

Previous ARRA Tax Credit Better

I wish for the sake of other homeowners that this tax credit was as generous as it was a few years ago.  Unfortunately, it is not. In early 2009, the tax credit was modified as part of the American Recovery and Reinvestment Act (ARRA). The modification waived limits on individual appliances and allowed homeowners to claim 30 percent of the total cost of the appliance or retrofit measure, up to $1,500.

This is a more realistic tax incentive to encourage homeowners to upgrade their homes with more energy efficient equipment of 15 SEER or better.   I’m not sure $500.00 is enough, and neither are the many contractors who benefited from the increased retrofit work they received as a result of the higher tax credits.  Oh well.

But — $500.00 is better than nothing – and if you are living in a home in dire need of an HVAC upgrade and battling high heating and cooling costs, don’t forget about this credit.  Qualified equipment includes:

Water Heaters ($300 Tax Credit)

• Electric heat pump water heaters with energy factors of at least 2.0

• Natural gas, propane, or oil water heaters with energy factors of at least 0.82 or thermal efficiencies of at least 90 percent

Furnaces ($150 Tax Credit)

• Natural gas, propane, or oil furnaces with AFUE ratings of not less than 95 percent

Boilers ($150TaxCredit)

• Natural gas, propane, or oil boilers with AFUE ratings of not less than 95 percent

Air Conditioners and Heat Pumps ($300 Tax Credit)

• Split system central air conditioners that achieve the highest-efficiency CEE tier as of Jan. 1, 2009 (16 SEER; 13 EER)

• Packaged central air conditioners that achieve the highest-efficiency CEE tier as of Jan. 1, 2009 (14 SEER; 12 EER)

• Split system electric heat pumps that achieve the highest-efficiency CEE tier as of Jan. 1, 2009 (8.5 HSPF; 12.5 EER; 15 SEER

• Packaged electric heat pumps that achieve the highest-efficiency CEE tier as of Jan. 1, 2009 (8.0 HSPF; 12.0 EER; 14 SEER)

Advanced Main Air-Circulating Fan ($50 Tax Credit)

• A fan used in a natural gas, propane, or oil furnaces with annual electricity use of no more than 2 percent of the furnace’s total energy use

So, print this out and show it to your contractor before you make any decisions about the replacement of your HVAC or water heating equipment.

 

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