This credit applies to equipment placed in service by Dec. 31, 2007. Congress is now considering extensions of this credit, but at this time, equipment placed in service in 2008 is not eligible for credits.
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, 2006, through December 31, 2007. 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 and ground-source heat pumps: $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. More information on the CEE specification.
- 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 must meet the following criteria (the same criteria as for Energy Star):
- Closed-loop systems—14.1 cooling EER and 3.3 heating Coefficient of Performance (COP)
- Open-loop systems—16.2 EER and 3.6 COP
- Direct-expansion systems—15 EER and 3.5 COP. In addition, ground-source heat pumps must include a desuperheater (which preheats water for a water heater) or an integrated water heating system.
- 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. 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 2006 or 2007 are eligible.
Click here to access IRS guidance on qualifying energy-efficient property.
Where can I find out more about qualifying products?
- Furnaces and boilers: Information on qualifying equipment can be found at:
- Central Air Conditioning Units and Heat Pumps: Information on qualifying equipment can be found at the Consortium for Energy Efficiency (for air conditioners) and Energy Star (for ground-source heat pumps) web sites. ACEEE has general information as well as a list of the most efficient products. DOE also has general information:
- Consortium for Energy Efficiency - look for A/C equipment meeting "Residential Tier 2"
- Energy Star (ground-source heat pumps)
- American Council for an Energy-Efficient Economy
- U.S. Department of Energy (heat pumps)
- U.S. Department of Energy (cooling systems)
- Geothermal Heat Pump Consortium (ground-source heat pumps)
- Fans for Heating and Cooling Systems: See the Gas Appliance Manufacturers Association (GAMA) Directory
- Water Heaters: Information on which equipment meets the required Energy Factor levels can be found in a directory published by GAMA. More general information can be found on the ACEEE and DOE websites:
