Federal Tax Credit for HVAC Systems: How Does it Work and How to Claim (Step-by-Step Instructions) (2024)

Here’s the deal: you bought a new HVAC system in 2020 and heard you might be able to get a Federal tax credit. But how do you go about it? The great news is you can claim it when you file your income taxes in 2021, so now is the time to act!

The best part? For qualified HVAC improvements, homeowners might be able to claim 25c tax credits equal to 10% of the install costs (up to a maximum of $500).

If you’re unsure of how to get the tax credit you might be eligible for, don’t worry. We’ve got you covered! Read on through this post to learn about the eligibility criteria of the federal tax credit scheme for high efficiency HVAC systems, and find out how you can claim some money back.

And for any other heating or cooling worries you may have, remember that SuperTech is Baltimore's best HVAC contractor!

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What is the Federal Tax Credit For High Efficiency HVAC Systems?

The nonbusiness energy property tax credit provides an incentive for homeowners to invest in energy-efficient home improvements, such as high efficiency heating, cooling, and water-heating equipment. It’s a non-refundable personal tax credit, i.e., reducing taxes, dollar-for-dollar. It was enacted as part of the Energy Policy Act of 2005 and has been expanded multiple times, now through December 31^st, 2021.

Why is this important? Well, this means that any purchase of a qualifying high efficiency HVAC system throughout 2021 is covered by the tax credit.

How Does Energy Tax Credit Work and How Much Will I Be Given?

Although it sounds quite complicated, once you get to know the details, it’s not too difficult to understand. Thanks to the tax credit, homeowners will receive a credit against their taxes for an amount equal to 10% of the amount paid or incurred up to $500 or a specific amount from $50 – $300.

We won't lie, there are some specifics you need to be aware of. In the following section, we use some abbreviations, which are explained below:

• SEER – Seasonal Energy Efficiency Ratio, which measures how much heat is removed by an AC or Heat Pump in watt-hours. The higher the ratio, the more energy efficient.
• EER – Energy Efficiency Ratio. It measures how efficient an AC or Heat Pump operates when the outdoor temperature is 95F or higher.
• HSPF – Heating Seasonal Performance Factor. It measures the ratio of heat output from a Heat Pump to electricity used.
• AFUE – Annualized Fuel Utilization Efficiency. It’s a percentage used to rate the heating efficiencies of furnaces. The higher the percentage, the more energy efficient.

How Do I Find Out The SEER, EER, HSPF, And AFUE Of My HVAC System?

The best way to find out this information is to contact the HVAC contractor who installed your system. Here at SuperTech, we provide that information in our install contracts, and if you’re unsure, you can always give us a call!

With these, you can qualify for tax credit up to $300. Split systems must have a minimum of 16 SEER and 13 EER whereas packaged systems must meet or exceed 14 SEER and 12 EER.

A split system is split into two units: one that’s inside and one that’s outside.

On the other hand, packaged systems have all of their main components (condenser, compressor, and evaporator) combined together in one single, metal-encased package.

Am I Eligible To Claim HVAC Rebate?

It sounds great, doesn’t it? But what’s the bottom line? How do you know if you’re eligible?

First of all, if the system meets the qualifications in the section above, it’s energy star certified. This proof is often in the form of an AHRI certificate or a manufacturer certification. As a homeowner, you should keep proof for your own records, but you don’t need to attach them to your tax return when you file. In addition, to be eligible for the tax credit, the system must be installed at your existing home, which is also your primary residence.

Unfortunately, tax credits are not available for new constructions or rentals. They're only for systems that you replaced or added at your current home.

Also, if you’ve already claimed $500 from the Non-business Energy Property Tax Credit since 2005, you won’t be eligible to claim any more credits.

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How To Claim Residential Energy Credit?

First things first, to claim your tax credits, be sure to keep a copy of the manufacturer’s certification statement to show the efficiency ratings of the system. You won’t qualify for the credits without one.

In order to apply for the tax credit, you need to fileIRS Form 5695 with your tax return, which we will go through in the following section.

Step-By-Step Guide To Filling Out IRS Form 5695 To Claim Federal Tax Credits For Your HVAC System

For those who have claimed non-business energy property tax credit in the past, it’s likely you have hit the limit. Or if you suspect that you might hit the tax credit limitation, consult a tax preparation professional instead.

For those who have not claimed any non-business energy property tax credit in the past, follow the examples below.

• Put $300 in Line 23, 24 and 30.

• Put $150 in Line 22b;

• Put $300 in Line 22a;
• Put 150 in Line 22b;

• Put $450 in Line 23, 24 and 30.

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How SuperTech HVAC Can Assist With Your HVAC System Installation

The federal tax credit for high efficiency HVAC systems is an excellent scheme that you should undoubtedly take advantage of. As well as being reimbursed for some of the upfront costs of a new system, you will also save money in the long run, as a new, highly-efficient HVAC system costs a lot less to run than other, older systems.

AtSuperTech HVAC, we offer a broad range of professional services, includingnew system installationsandrepairs. We are experts at installingenergy efficient HVAC systems across the Baltimore area, that will ensure you are eligible for the federal tax credit. If you want to entrust a highly skilled, professional, family-run team to install a new HVAC system in your home, then give us a callor schedule an appthere and we would be delighted to discuss the ways in which we can help!