Consumer Tax Incentives
Home Heating & Cooling Equipment
What are the incentives for home heating & cooling equipment?
Please note that these incentives have changed as of February 17, 2009. If you installed home envelope components between January 1 and February 16, 2009, click here.
Purchasers of highly efficient heating, cooling, and water heating equipment can take tax credits of 30% of installed cost for purchasing qualifying equipment, as detailed below. These credits are available for systems placed in service from January 1, 2009, through December 31, 2010. There is a $1,500 cap on the credit per home, including the amount received for insulation, windows, air and duct sealing.
Congress extended this provision for 2011 with some modifications to eligibility requirements, and reductions in the cap to $500 per home. The $500 limit applies to heating and cooling equipment and to building envelope improvements, and applies to all years – if you received a credit in 2009 of $500 or more, you cannot receive it again in 2011. In addition, there are some instances where there is a cap on a specific product, see equipment descriptions below for 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
- NEW - Ground-source or geothermal heat pumps
- NEW - 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:
- Furnaces and Boilers:
- Until December 31, 2010: Natural gas & propane furnaces must meet an Annual Fuel Use Efficiency (AFUE) 95 or higher, oil furnaces and gas, oil and propane boilers must meet an AFUE of 90 or better.
- From January 1 through December 31, 2011: Natural gas & propane furnaces must meet an Annual Fuel Use Efficiency (AFUE) 95 or higher, oil furnaces and gas, oil and propane boilers must meet an AFUE of 95 or better. In addition, the credit only covers costs up to $150
- Central Air Conditioning Units:
- Until December 31, 2010: Central air conditioning units and air-source heat pumps must meet the highest tier standards set by the Consortium for Energy Efficiency (CEE) as of February 17, 2009, 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.
- Until December 31, 2011: same specifications, the credit only covers costs up to $300
- Biomass Stoves: 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.
- Until December 31, 2010, manufacturers could certify their stoves using a lower heating value. 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.
- From January 1 through December 31, 2011: efficiency needs to be measured using a higher heating value and therefore some stoves that barely qualified in 2010 will no longer be eligible. The credit only covers costs up to $300
- Fans for heating and cooling systems:
- Until December 31, 2010: fan uses no more than 2% of total heating system energy use, as defined by DOE test procedure. For more information, see the Air-Conditioning, Heating and Refrigeration Institute web site . It is still unclear how the 2009 Stimulus legislation has impacted this incentive - it seems reasonable to assume that the cost basis will be the reasonable cost of the fan, not the entire furnace. IRS has yet to issue specific guidance on this issue.
- From January 1 through December 31, 2011: $50 for any advanced main air circulating fan
- Water Heaters:
- Until December 31, 2010:
- Gas or propane water heaters—Energy Factor of at least 0.82, or a thermal efficiency of at least 90%.
- Heat pump water heaters—Energy Factor of at least 2.0
- From January 1 through December 31, 2011: same specifications, the credit only covers costs up to $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 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:
