Rebates & Tax Credits for Heating & Cooling Services

HVAC Tax Credit FAQ

We know you have a lot of questions regarding the tax credits available for your new heater or air conditioner. As your trusted comfort specialists in Champaign, we want you to make the best decisions for your home and family. Check out the information we’ve put together below. These are answers to some of the most frequently asked questions from our past customers that we deem helpful for you to better understand HVAC tax credit better.

Are the tax credits different for geothermal heat pumps?

If you have installed a geothermal heat pump in your home, you may be allowed to claim up to 30% of the tax credits in the year the system was installed. However, there is no dollar limit to the credit on geothermal heat pumps. The geothermal tax credit also has a longer term.

Can I claim the credit for improvements to a second home?

No. The tax credit is only available for improvement to the taxpayer’s primary residence.

Can I use the entire $1200 tax credit on a single qualifying home improvement?

Yes, the previous per-appliance limit has now been removed. You can now use the entire $1200 on a single home improvement and not be limited by a $150 cap on a high-efficiency furnace or $300 on an AC or heat pump.

Can modular or mobile homeowners qualify?

Yes. As long as the improvements meet the qualifying criteria and the homeowner’s primary residence they may claim the tax credit.

Does the tax credit apply only to the equipment cost or to both equipment and labor costs?

The credit applies to the installed costs of the qualified equipment, which includes labor.

How do I claim the credit?

The IRS has directed taxpayers to use Form 5695 to claim the credit. Taxpayers are also instructed to keep complete records of their installation and home improvements.

How do I know which specific equipment or improvements qualify for the tax credit?

There is a wide range of products available that qualify for the full tax credits. Schedule an online appointment for a FREE consultation with Castle Home Comfort Heating & Cooling to review all available options or call us now to schedule.

What is the amount of the HVAC Tax Credit?

For purchases made from 2023 to 2033, the total amount for all years of credit is limited to $1200. Taxpayers are ineligible for this tax credit if the credit was claimed in an amount of $1200 in any previous year.

​​​​​​Here are the systems qualified for tax credits including the respective amount you may receive:

• Air conditioners- $300
• Heat pumps- $300
• Split air conditioner systems (with at least 16 SEER and 13 EER)- $300
• Split electric heat pump systems (with at least 8.5 HSPF; 12.5 EER; 15 SEER)- $300
• Packaged air conditioners (with at least 14 SEER and 12 EER)- $300
• Packaged heat pumps (with at least 8.0 HSPF; 12.0 EER; 14 SEER)- $300\
• Advanced main air circulating fan (especially those used in a natural gas, propane, or oil furnace with no more than 2% annual electricity use of the total energy- $50
• Boilers (natural gas, propane, and oil units with at least 95 AFUE)- $150
• Furnaces (natural gas, propane, and oil units with at least 95 AFUE)- $150
• Water heaters (natural gas, propane, and oil units with at least 0.82 or a 90% thermal efficiency as well as electric pump heaters with an energy factor of at 2.0) -$300

What happens of the 30% of the installed costs is less than $1200?

The homeowner can “bank” the remaining available tax credit for other qualified improvements. Any single installation that costs more than $5000 will instantly reach the $1200 limit.

What if I install a furnace that meets the 95% AFUE standard, but with a central air conditioner below the standard? Can I still claim the full $120?

Homeowners can claim 30% of the final installation costs up to $1200 associated specifically with the 95% AFUE furnace. Should the installation costs associated with the furnace not reach $5,000, 30% of the installation cost can still be claimed and the difference between that amount and the $1200 cap can be applied to any other qualifying improvements.

What if I previously claimed tax credits?

Homeowners that previously claimed and reached the $1200 tax credit limit may not file for another credit.

What is the timeframe for the new tax credits?

The credits were made retroactive to January 1, 2012, and apply to qualifying equipment installed any time after December 31, 2011, through December 31, 2013.

What’s the difference between a tax credit and a tax deduction?

A tax credit applies against the taxpayers’ liability. A tax deduction applies against a taxpayer’s income, lowering the adjusted gross income and possibly moving the taxpayer to a lower tax bracket.