1. Heating by burning a fuel is inherently inefficient. High-efficiency furnaces have components that are better designed to get more heat out of the combustion process, Dream Group’s Lunsford says.
2. Hire an HVAC contractor to calculate the size of the equipment needed for your home. Beware bidders who take a one-size-furnace-fits-all approach. Air source heat pumps and advanced main circulating fans may also qualify for the tax credit — check energystar.gov for the latest guidance.
3. Don’t rely solely on contractors who may not know the details or who promise their products will get the credit in order to sell you a new system.
4. Technically, you can replace either a furnace or a central air-conditioning unit and be eligible for the tax credit. Practically speaking, you’ll likely have to replace both for the A/C to qualify, says Enesta Jones, a spokeswoman for the U.S. Environmental Protection Agency.
5. Most homes have split systems made up of an outdoor condenser and compressor that are connected to an indoor air handler that’s part of the furnace. Split systems must have a SEER rating of at least 16 and an EER rating of at least 13. The higher the rating, the more energy efficient the unit. A package A/C system, which houses all of its components outdoors, requires lower ratings.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.