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What You Need Know About Energy Tax Credits for Heating and Cooling Systems

Published on April 5th, 2017

heating and cooling systems

Government agencies, utilities, and others offer lots of tax credits, rebates, and other incentives. If you made eligible energy-efficient upgrades to your heating and cooling systems in 2016, claim your tax credits (and rebates!) this tax season.

It pays to make energy-efficient upgrades in your home! Half of the energy your family uses goes to heating and cooling, so installing energy-efficient upgrades on your heating and cooling systems is smart. When it comes to your home’s heating, ventilating and air conditioning system, every decision can raise or lower your utility bills.

Did you make energy-efficient upgrades to your HVAC unit or a non-solar water heater last year? If you did, you might qualify for some valuable tax credits this year. Find out if you can claim the credits for installing those upgrades this tax season. It’s worth investigating and putting more of your money where it will work for you!

Tax Credits are Valuable

Tax credits on energy-efficient upgrades are valuable. Why? They let you offset the amount you owe to the IRS dollar for dollar. If you installed an eligible HVAC system by December 31, 2016, you can claim dollar for dollar for up to 10% of the amount you spent.

Read How to Claim the Tax Energy Credits You Deserve and find out how to claim a few hundred dollars that might be coming to you on your taxes this year.

Basics You Need to Know About Energy-Tax-Credit-Eligible Heating and Cooling Systems

Energy tax credits are available for *some heating and cooling systems improvements. Follow these basic guidelines to claim them:

  • Install a relevant heating and cooling system by December 31, 2016.
  • Save manufacturer certifications and receipts.
  • Claim the lifetime credit maximum of 10% of costs for all energy improvements combined, up to $500.
  • File IRS Form 5695 with your returns.

Some heating and cooling improvements have individual limits:

  • Advanced main air circulating fans have an individual limit of $50.
  • Qualified natural gas, propane, or oil furnaces or hot water boilers have an individual limit of $150.
  • Certain approved electric and geothermal heat pumps, central air conditioning systems, and natural gas, propane, or oil water heaters, specified as qualified energy-efficient items by the IRS, have an individual limit of $300.

*Visit the Energy Star site for up-to-date guidelines on which heating and cooling systems are covered. You’ll get the best information on the kinds of systems and individual products you can claim credit for on the Energy Star site.

Be Aware That Not All Heating and Cooling Systems Qualify for Energy Tax Credits

Energy Star products that are eligible for tax credits are independently certified to save energy and money as well as protecting the environment. But just because a product has an Energy Star rating, that doesn’t mean you will get the tax credit.

Energy Star-rated furnaces are required to be more efficient than standard units are. (And Energy Star products use up to 30% less energy in your home!) Their annual fuel utilization efficiency ratings (AFUE) must have a certain percentage to get the tax credit. Check Energy Star online for updated AFUE requirements before making a purchase as these criteria may update at any time.

Energy Star Federal Tax Credits for Heating and Cooling Systems Expired

All Energy Star federal tax credits expired at the end of 2016. But don’t rely solely on Blue Frost Heating & Cooling for details of the energy tax credit program. We want to inform and encourage you to do your homework on available tax credits (and rebates!) for heating and cooling systems. Ask your professional tax/financial planner for expert advice and claim the tax credits that may be available to you.

Government agencies, utilities, and others offer lots of tax credits, rebates, and other incentives. This supports energy efficiency, encourages the use of renewable energy sources, and supports efforts to conserve energy and reduce pollution. Rebates on energy-efficient products are available, too! Visit energy.gov for a list of tax credits, rebates, and savings for us Illinois residents.

Call Blue Frost Heating & Cooling at (630) 761-9007 about the energy tax credit program or referrals for professional tax/financial planners. And just in case you are wondering about other tax deductions you may be able to claim, read Don’t Miss These Home Tax Deductions.

Many happy returns from Blue Frost Heating & Cooling this tax season!

heating and cooling systems

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