Air Conditioner Tax Credit - A How-to Guide

Air Conditioner Tax Credit Guide for Credits and Rebates, Including Minimum SEER, EER, and HSPF Ratings for Qualified A/C and Heat Pump Systems

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If you've recently installed or plan to install a new HVAC system and you’ve elected for long-term savings that come from high efficiency, you may be able to cushion the blow of high initial costs with federal and local tax credits.

Federal tax credits for some systems, such as central air conditioners, split ductless air conditioners, and heat pumps, have declined in value since 2010 but could nonetheless save you hundreds.

On Dec. 17, 2010, President Obama signed into law an act that extended tax credits at lower values for home renovation, including new central air conditioning, that ended in 2011. If you bought an air conditioner last year, you're eligible for this tax break (usually about $300) depending on the system's efficiency rating.

Since Jan. 1, 2012, air conditioners are no longer eligible for federal tax rebates, although you may be able to get local rebates. You can enter your zip code here to see if any special offers are available locally.

The method for cashing in your rebate is as follows: claim your tax credit when you file your taxes. For example, if you bought an air conditioner in 2011, claim it when you file your taxes in 2012. You’ll need to fill out IRS form 5695, which is available here.

THAT’S REBATE-ABLE

Central air conditioning eligible for tax credits must meet minimum efficiency ratings, including EER (Energy Efficiency Ratio) and SEER (Seasonal Energy Efficiency Ratio). Heat pumps, which double as cooling systems, must meet minimum levels for those efficiency ratings as well as HSPF (Heating Seasonal Performance Factor).

Here’s a list of the minimum efficiency ratings your system must meet for tax credit eligibility, as of Jan. 1, 2009.

Split System Air Conditioner

• SEER: 16 or higher
• EER: 13 or higher

Packaged Air Conditioner

• SEER: 14 or higher
• EER: 12 or higher

Split System Air Source Heat Pump

• SEER: 15 or higher
• EER: 12.5 or higher
• HSPF: 8.5 or higher

Packaged Air Source Heat Pump

• SEER: 14 or higher
• EER: 12 or higher
• HSPF: 8 or higher

SPECIAL OFFERS AND OTHER REBATES

Energy Star sponsors other rebates for central system air conditioning not included in Obama’s federal law that are generally limited to specific areas. These include sales tax exemptions, rebates, and recycling kickbacks for removing old units properly. Other incentives may also be offered by local and state government or other agencies.

One excellent example of energy credits at the state and local levels is California. With everything from the hottest desert to the highest mountain in the lower 48, California is very conscious of energy usage. No matter what state you live in, your local power and gas companies should be able to guide you to the available tax credits. You should also talk to your tax professional.

When calculating the savings from an energy efficient air conditioner, it’s helpful to calculate the expected lifetime of the unit times the amount that you can expect to save each year.

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