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Are there HVAC rebates out there that could help you save money, either at the time of purchase or even perhaps at tax time? There’s good news — not only are there occasionally options for actual purchase rebates, but there is an ongoing system for federal tax credits for which you may be eligible. The government has repeatedly expressed a serious interest in promoting energy efficiency across the board, not only to safeguard the environment but also to ensure the smarter usage of our resources. As a result, Congress has repeatedly chosen to incentivize the replacement of old and outdated equipment with newer and more energy-efficient units.

Thus, making such upgrades has a twofold benefit for homeowners: your monthly energy bills could decrease due to better efficiency while your next tax bill becomes more affordable, too. What rebates and credits are out there? First, it’s important to understand who qualifies for these credits.


Who is Eligible for HVAC Tax Credits?

Under current legislation passed in 2020 to provide disaster relief nationwide, a long-running tax credit for installing energy-efficient hardware was extended. Under the terms of the law, homeowners who made energy improvements to their homes between the years of 2017 and December 31st 2020, can claim these tax credits providing they satisfy additional criteria.

Importantly, the credit applies only for homeowners and only for those homeowners using the property as their primary residence. In other words, individuals renting a property aren’t entitled to any HVAC tax credits, and neither are landlords who make similar upgrades to their investment properties. Homeowners who built a brand-new property from the ground up are also ineligible. There are some credits available for commercial properties; see below for a discussion on those.


Types of HVAC Rebates Currently Available

The primary credit available in 2021 is called the Non-Business Energy Property Tax Credit. There are many credits available related to home systems, such as water heaters, but what about the specific HVAC-related rebates? These include:

  • A credit on the installation of an Energy Star “Most Efficient”-rated central air conditioner. This credit is worth 10% of the total cost of the unit and installation, up to a maximum value of $500. Package systems must have a SEER greater than or equal to 14, and split systems must meet a SEER requirement of 16 or greater.
  • A $300 tax credit for installing air source heat pumps used for both heating and cooling.
  • A $50 tax credit when you install a more efficient central air blower fan called an Advanced Main Circulating Fan.
  • A $150 tax credit for installing an Energy Star-approved furnace, whether it is gas or oil-fired.

Energy Star also partners with some equipment providers to offer direct HVAC rebates on new equipment purchases. Use this government web tool to search for rebates available in your area.

Keep in mind that the tax code changes all the time, and these credits are only applicable if you made the improvements in 2020 or earlier. While Congress may choose to extend these tax credits further or replace them, you should always check with your tax professional to stay on top of these changes.


What About Tax Credits for Commercial Businesses?

Commercial building owners can also access a rebate program designed to encourage improvements in energy consumption, although it functions differently than the consumer system. Simply put, if a business can demonstrate a 50% overall savings on energy consumption by making changes to the HVAC system, they can claim a tax rebate to offset the cost. It’s a credit worth $1.80 per square foot, with a potential 60 cent per square foot credit when your business achieves progress towards the 50% milestone but misses the mark. This specific credit is only available for buildings built or systems installed from January 1 2018 onward.

For home builders, there are $1,000 and $2,000 tax credits available for design improvements. These credits have strict and complex requirements, such as deriving one-fifth of energy improvements from thermal envelope enhancements alone. An accountant can help you make sense of these credits.


How Do I Claim My HVAC Rebates?

For the average homeowner looking to claim one of the credits described above, you will need to download and complete the IRS Form 5695 and include it with your annual tax return. This worksheet will guide you through calculating your credit and applying it to the remainder of your taxes. For commercial businesses, the IRS requires certified energy consumption modeling and additional forms to prove that you qualified for the credit.

Both homeowners and business operators should speak to their preferred tax professionals about taking advantage of these HVAC rebates and credits. When you could easily enjoy better comfort and lower energy bills while improving the chances you’ll receive a tax refund, why not explore your options?