How can I determine if our HVAC system replacement falls within the energy-saving improvements?

[HelenC12]

To see if your HVAC system replacement meets the requirements for the Energy Efficient Home Improvement Credit, see the CEE Directory of Efficient Equipment  website. It's a searchable database of qualifying equipment.

Per IRS, electric or natural gas heat pumps, electric or natural gas heat pump water heaters, central air conditioners, natural gas or propane or oil water heaters, natural gas or propane or oil furnaces or hot water boilers: must meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency (CEE) that is in effect as of the beginning of the year in which the property is placed in service. 

Related information:

• How do I add or remove Form 5695?

[jamesmbryant]

I found that information, and I appreciate you providing it again. However, I was still a bit confused with the search in determining whether my system replacement would fall within this ES improvement.

[MichaelG81]

It depends, there are several ways to figure if you qualify. As noted: Electric or natural gas heat pumps, electric or natural gas heat pump water heaters, central air conditioners, natural gas or propane or oil water heaters, natural gas or propane or oil furnaces or hot water boilers: must meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency (CEE) that is in effect as of the beginning of the year in which the property is placed in service. See also the CEE Directory of Efficient Equipment for a searchable database of qualifying equipment. Here is the Clean Energy Products FAQs with the IRS. Also, HVACs have to be a certain SEER rating, EER rating, and HSPF rating usually given by a certificate or noted by the contractor. It doesn't have to be the highest SEER or EER rating, just enough to be energy efficient according to guidelines that most HVAC contractors know which systems qualify for the credit, as well, if you cant find your particular model. 

• Split Systems must have an HSPF (Heating Seasonal Performance Factor) of at least 8.5, an EER (Energy Efficiency Ratio) of at least 12.5, and a SEER (Seasonal Energy Efficiency Ratio) of at least 15.
• Packaged Systems must have an HSPF (Heating Seasonal Performance Factor) of at least 8, an EER (Energy Efficiency Ratio) of at least 12, and a SEER (Seasonal Energy Efficiency Ratio) of at least 14.
• ENERGY STAR certified heat pumps meet the tax credit requirements.
• System must be installed before December 31, 2022.

For tax year 2023 there may have been changes not included with this, this is strictly for installations through December 31, 2022, current taxes.

@jamesmbryant

[Opus 17]

@MichaelG81 

@HelenC12 

The requirement that appliances meet the CEE top tier in place for the year they were installed, only applies to 2023 and forward.  For 2022, the law states that appliances must meet the top CEE tier for 2009.  Most of the changes to section 25C were NOT retroactive to 2022.

https://ttlc.intuit.com/community/tax-law-changes/discussion/faq-revisions-to-section-25c-energy-eff...

[Opus 17]

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@jamesmbryant wrote:

I found that information, and I appreciate you providing it again. However, I was still a bit confused with the search in determining whether my system replacement would fall within this ES improvement.

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You need to find the system specs and compare them with the requirement.

For a system installed in 2022, the credit is 10% of the cost up to $500.  (Specifically, up to $300 for A/C, up to $150 for a furnace, and up to $50 for a main circulating blower.  So depending on what you bought and if you have a price split from the installer, you might qualify for up to $500.)

For a system installed in 2022, you need the 2009 energy efficiency standards, you will have to search for them.  I found this page for A/C systems.

https://library.cee1.org/system/files/library/12087/CEE_ResHVAC_specification2009.pdf

The system must meet the highest tier not counting advanced tiers.  That means that for a split central A/C, it must have a SEER of 15 or better.  See below.

If you don't know the SEER, check the label inside or on the unit, or check the instruction manual, or call your installer.

For units installed in 2023, the credit is 30% of the cost up to $600, and the system must meet the top tier efficiency standards for the year the system was installed.  That means the 2023 standards, as published on the linked web site. 

[jamesmbryant]

@Opus 17 

Thank you so much! That was very helpful. I believe we qualify for the ES Improvement.

Here is exactly what we installed from our invoice minus the cost for apparent reasons.

If it matters, we live in NC too. Can you confirm if my assumption that we qualify is accurate?

[Opus 17]

The 16 SEER air conditioner would qualify for a credit of 10% up to $300 in the air conditioner portion of form 5695.

I can’t find the 2009 standard for a gas forced air furnace, but the highest tier in 2014 was 97% AUFE (Annual fuel utilization efficiency).  Your specification only says 80+, so I don’t know what your AUFE is or whether it would qualify for the 10% credit (up to $150) for an efficient gas furnace .

I don’t see any listing for an advanced mean circulating fan, so I can’t comment whether you would qualify for that credit either (10% up to $50). 

The other problem you could have if audited, is can you prove how much the air conditioner actually cost? If you paid one price to install the whole system, but you claim the full credit for the air conditioner, that would mean you are claiming that the air conditioner portion cost at least $3000. Could you prove it if audited?

[catusmc]

How can I determine this for previous years. In my case, 2021.

[Opus 17]

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@catusmc wrote:

How can I determine this for previous years. In my case, 2021.

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If you installed an efficient appliance in 2021, the credit can only be claimed on your 2021 tax return, using the rules in place at the time.  In 2021, there was a lifetime cap on all credits for energy efficient improvements of $500.  If you had not exceeded the cap by 2021, the credit was 10% of cost plus installation, with a maximum of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property (which includes the air conditioner unit).  So the maximum credit for installing an efficient system could be as much as $500, but each component (fan, furnace and a/c) must meet its own individual standard, and you can't have exceeded the lifetime cap in a prior year.

For 2021, the efficiency standard was 

• An electric heat pump water heater that yields a Uniform Energy Factor of at least 2.2 in the standard Department of Energy test procedure.
• An electric heat pump that achieves the highest efficiency tier established by the Consortium for Energy Efficiency (CEE) as in effect on January 1, 2009.
• A central air conditioner that achieves the highest efficiency tier that has been established by the CEE as in effect on January 1, 2009.
• A natural gas, propane, or oil water heater that has a Uniform Energy Factor of at least 0.82 or a thermal efficiency of at least 90%.

You would have to check with the manufacturer, or the CEEE web site, or your product instruction manuals, to determine if it met the required efficiency standard. 

[DianeW777]

Review the instructions for qualifying property for 2021. Check to see if your energy equipment qualifies.

• Form 5695 (2021)
• Instruction 5695 (2021) 

Nonbusiness Energy Property Credit (Part II) 

You may be able to take a credit equal to the sum of: 

1. 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2021, and 

2. Any residential energy property costs paid or incurred in 2021. 

However, this credit is limited as follows. 

• • A total combined credit limit of $500 for all tax years after 2005. 
• • A combined credit limit of $200 for windows for all tax years after 2005. 
• • A credit limit for residential energy property costs for 2021 of $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property.

Prior Year amended return:

• Accessing a prior-year return
• Get My IRS Transcript
• How to amend (change or correct) a return already filed?
• What is the deadline for filing an amended return?

@catusmc