On December 31, 2013, the 25C federal tax credit will once again expire. This popular program, which was originally offered between 2006 and 2011, offers homeowners credits on their federal tax returns for installing qualifying HVAC equipment. This past January, Congress passed legislation to reinstate the 25C federal tax credit for the remainder of 2013 and retroactively for all of 2012. If you have been considering a furnace or boiler upgrade, don’t wait to purchase your new equipment. You could lose up to $300 in tax credits if you do.
Qualifying Equipment Purchases
HVAC equipment that qualifies for a 25C federal tax credit include air conditioners, heat pumps, fans, boilers, furnaces and water heaters. However, your purchase must meet specific criteria in order to claim the tax deduction on your 2013 return. These are as follows:
- Split system and packaged central air conditioning systems must have Seasonal Energy Efficiency Ratings (SEER) of at least 16 or 14. The credit amount is $300.
- Split system and packaged electric heat pumps are required to have a Heat Seasonal Performance Factor (HSPF) or 8.5 or 8.0 for a $300 credit.
- Water heaters with an electric heat pump and those that utilize oil, propane or natural gas are eligible for a $300 credit. The requirements include a 2.0 energy factor for the electric type and 0.82 energy factor or 90 percent thermal efficiency rating for the second type of water heaters.
- A $150 tax credit is available for boilers and furnaces that use oil, natural gas or propane. Both pieces of heating equipment are required to have a Heat Seasonal Performance Factor (HSPF) of 95 percent or better.
- You may claim a $50 credit for an advanced main circulating fan attached to your furnace. The cost of using the fan can’t be more than two percent of your total cost of operating the furnace in order to be eligible.
How to Evaluate Your Current Furnace
At Assurance Heating & Air Conditioning, Inc., we recommend replacing your furnace if it is more than 15 years old. You can save at least 15 percent on your utility bills by taking advantage of the tax credit for a furnace or boiler upgrade. The key is to look for an Energy Star label and a furnace or boiler with a high Annual Fuel Utilization Efficiency (AFUE) rating. The range is typically between 80 and 98 percent.
Besides age, other indications that your heating system needs to be replaced include:
- Parts of your home are too hot or too cold.
- Your energy bills are increasing.
- You have frequent repair costs.
- Your current system is too noisy.
- You have too much dust or humidity in your home.
Once your new system is installed, you can extend its lifespan by scheduling regular preventative maintenance appointments.