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 10% of the cost of qualifying equipment. These credits are available for systems placed in service from January 1, 2012 through December 31, 2013.The credit is limited to $50 - $500 dependent on the product type. See equipment descriptions below for more details.
I don't think I qualify for this incentive - where can I find information on state-level incentives?
What types of equipment qualify?
- High-efficiency gas, oil, and propane furnaces and boilers
- High-efficiency central air conditioning units, including air-source heat pumps
- Ground-source or geothermal heat pumps
- Biomass Stoves
- High-efficiency fans for heating and cooling systems
- High-efficiency water heaters, including heat pump water heater
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:
- Central Air Conditioning Units: Until December 31, 2013: Central air conditioning units and air-source heat pumps must meet the highest tier standards set by the Consortium for Energy Efficiency (CEE), which in most cases requires a Seasonal Energy Efficiency Ratio (SEER) of 16. SEER measures performance throughout the cooling season. More information on the CEE specification. The credit covers costs up to $300.
- Biomass Stoves: From January 1, 2012 through December 31, 2013: Manufacturers must provide a certificate of qualification for each product. Taxpayers must retain the certification statement for tax recordkeeping purposes, but the certification is not required to be attached to the tax return. Stoves must have a thermal efficiency of 75% and be used to heat a dwelling unit or heat water for use in the same. The law defines biomass fuel as anything from agricultural crops, trees, wood wastes & residues to pellets, plants, grasses and fibers. The credit covers up to $300 for qualified stoves. Meaning every qualified stove purchase will receive the full $300 unless the taxpayer already claimed a similar credit of $500 in a previous year.
- Water Heaters: From January 1, 2012 through December 31, 2013: the credit covers costs up to $300. The specifications are as follows:
- Gas or propane water heaters—Energy Factor of at least 0.82, or a thermal efficiency of at least 90% required.
- Heat pump water heaters—Energy Factor of at least 2.0 required.
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 can help that home qualify for the new home tax credit.
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 2009 or 2010 are eligible.
Click here to access IRS guidance on qualifying energy-efficient property.
I don't think I qualify for the incentive - where can I find information on state-level incentives?
To apply for the incentive, use IRS form 5695. Please note that this version of the form is for 2008, and so does not include line items for the incentives discussed on this page. There will be a section for these incentives on the 2009 iteration of the form which will likely be available in late 2009 or early 2010.
Where can I find out more about qualifying products?
- Furnaces and Boilers: Information on qualifying equipment can be found at:
- Air-Conditioning, Heating, and Refrigeration Institute (AHRI)
- Energy Star (furnaces)
- Energy Star (boilers)
- U.S. Department of Energy Energy Savers
- American Council for an Energy-Efficient Economy
- Central Air Conditioning Units and Heat Pumps: Information on qualifying equipment can be found at the Consortium for Energy Efficiency web site. ACEEE and DOE also have general information.
- Consortium for Energy Efficiency
- American Council for an Energy-Efficient Economy
- U.S. Department of Energy (heat pumps)
- U.S. Department of Energy (cooling systems)
- Biomass Stoves
- Fans for Heating and Cooling Systems:
- Water Heaters: Information on which equipment meets the required Energy Factor levels can be found in a directory published by AHRI. More general information can be found on the ACEEE and DOE websites:
