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HVAC Tax Credits

Home Energy Savings Act to Extend the IRS Code Section 25C Credit

April 08, 2020

Exciting news for homeowners and upgrading their HVAC systems: The Internal Revenue Code Section 25C tax credit for qualified energy efficiency improvements has been retroactive beginning January 1, 2018 until Dec. 31, 2020.

What does this mean for you?

Homeowners will receive a credit against their taxes for an amount equal to the sum of:

  • 10% of the amount paid or incurred during the taxable year, capped at the below stated amounts. 
  • The amount of the residential energy property expenditures paid or incurred during the taxable year.
  • 25C tax credit is retroactive, starting January 2018, if homeowners choose to amend their taxes.
Maximum Tax Credit Available Product Type   Efficiency Requirements
 $50  Any advanced main air circulating fan  *See below
 $150  Natural gas, propane, oil furnace or boiler  95% AFUE
 $300  Split system air conditioner  16 SEER / 13 EER
 $300  Split system heat pump  15 SEER / 12.5 EER / 8.5 HSPF
 $300  Package air conditioner  14 SEER / 12 EER
 $300  Package heat pump  14 SEER / 12 EER / 8 HSPF
 $300  Package gas/electric  14 SEER / 12 EER

*An advanced main air circulating fan is a fan used in a natural gas, propane, or oil furnace and which has an annual electricity use of no more than 2 percent of the total annual energy use of the furnace 

  • Boilers and Furnaces: Oil, propane and natural gas hot water boilers must meet or exceed a 95% AFUE. Propane furnaces, natural gas furnaces and oil furnaces must meet or exceed a 95% AFUE. The maximum credit for boilers or gas furnaces is up to $150.
  • Central Air Conditioners: Split system central air conditioners must have a minimum of 13 EER and 16 SEER. The tax credit is up to $300.
  • Packaged system central air conditioners must meet or exceed 12 EER and 14 SEER. The tax credit is up to $300.
  • Heat Pumps: Packaged heat pump systems must have a minimum of 12.5 SEER, 8 HSPF and 15 SEER. Air source heat pumps are required to have a minimum of 12.5 EER, 8.5 HSPF and 15 SEER. The tax credit is up to $300.
  • Main Air Circulating Fan: The advanced main air circulating fan must not use more than 2% of energy. The tax credit is up to $50.

Other Notes: A homeowner can claim the § 25C credit only for qualifying expenditures incurred for an existing home or for an addition or renovation to an existing home. This cannot be claimed on a new construction home. Labor costs may be included while calculating the § 25C credit for the onsite preparation, assembly, or original installation. In contrast, a homeowner may not include the labor costs for qualified energy efficient building envelope components. The credit is subject to a cap of $500.

For more information or to schedule a consultation, please contact us today.

Please note: This notice is not to be considered tax advice. See your tax professional to determine how these credits may apply in your circumstance.

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