Congress, President Retroactively Extend HVAC and Water Heating 25C Tax Credits

On January 2, President Obama signed legislation designed to avoid the “fiscal cliff” and keep tax rates from increasing for every American who pays taxes. In addition to its many other tax provisions, the bill retroactively reinstates the 25C tax credits for highly efficient HVAC and water heating equipment that expired at the end of 2011.

Specifically, the bill extends the tax credits that expired in 2011 from January 1, 1012, until December 31, 2013, for qualified equipment listed in Section 25C of the Internal Revenue Code. Because the credits were made retroactive to January 1, 2012, they can be used for qualified equipment that was installed any time after December 31, 2011. 

Qualified equipment includes:

Water Heaters ($300 Tax Credit)

• Electric heat pump water heaters with an energy factor of at least 2.0
• Natural gas, propane, or oil water heater with an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent

Furnaces ($150 Tax Credit)

• Natural gas, propane, or oil furnace with an AFUE of not less than 95

Boilers ($150 Tax Credit)

• Natural gas, propane, or oil boiler with an AFUE of not less than 95

Air Conditioners and Heat Pumps ($300 Tax Credit)

• Split system central air conditioner that achieves the highest efficiency CEE tier as of January 1, 2009 (16 SEER; 13 EER)
• Packaged central air conditioner that achieves the highest efficiency CEE tier as of January 1, 2009 (14 SEER; 12 EER)
• Split system electric heat pump that achieves the highest efficiency CEE tier as of January 1, 2009 (8.5 HSPF; 12.5 EER; 15 SEER)
• Packaged electric heat pump that achieves the highest efficiency CEE tier as of January 1, 2009 (8.0 HSPF; 12.0 EER; 14 SEER)

Advanced Main Air Circulating Fan ($50 Tax Credit)

• A fan used in a natural gas, propane, or oil furnace with an annual electricity use of no more than 2 percent of the total energy use of the furnace.

We are not tax advisers. Please consult a qualified tax professional for more information.

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