What types of air conditioners qualify for tax credits and what are some of the requirements for the home and the air conditioning system in terms of qualifying?
Overview
No taxpayer likes to hear the mention of the word tax, and when tax season approaches, this can be considered as one of the worst times for people in general. Luckily, tax credits make the whole experience less daunting with certain things like air conditioners qualifying for credit.
People who own certain types of air conditioners will be happy to know that they can receive tax credit should their air conditioning system qualify for the credit. Credit will not mean the same thing as deductions on your income tax, but rather will reduce the amount of tax you owe.
Air conditioners and tax credit
As a taxpayer, you are obliged to pay a certain percentage of your income towards tax, which is a government requirement. For taxpayers who own certain energy efficient air conditioning systems, they will be happy to know that they could qualify for tax credits on their air conditioners.
It is important to note however, that not all air conditioners will come with this benefit. Tax credits for air conditioners will allow for the taxpayer to either receive an increased tax refund, or have their tax amount owed to be reduced for having a qualifying AC.
What air conditioners qualify for tax credit?
As previously mentioned, just because you own an air conditioner, does not mean that it will automatically qualify you for tax credit in the next tax season. Unfortunately, only certain air conditioning systems with specific Seasonal Energy Efficiency Ratios (SEER), and Energy Efficiency Ratios (EER) can qualify.
To be eligible for tax credit on an air conditioner, it will need to either be a split system air conditioner, a packaged system air conditioner or an air conditioner that falls under Energy Star Most Efficient.
When it comes to these different air conditioners, there are certain requirements they have to meet in terms of their SEER and EER ratings. Tax credit on these air conditioners can start at around $300 up to a maximum of $500, which makes a difference to your tax.
How can a taxpayer apply for tax credits on their air conditioning system?
One thing to note is that air conditioning systems that qualify for tax credits are also systems that have recently been upgraded and improved in some way.
To apply for tax credit, a taxpayer will have to get access to the Internal Revenue Service (IRS) Form 5695: Residential Energy Credit.
The process of applying for and getting tax credit is in line with the Internal Revenue Code section 25C of the Further Consolidated Appropriations Act, 2020. Taxpayers will also have to consult with a qualified tax professional.
What requirements should an air conditioning system need to meet to qualify for tax credit?
As previously mentioned, there are certain requirements that your air conditioner needs to meet in order to qualify for tax credit, and there are also certain standards it needs to meet.
A split system unit will have to meet a SEER rating of exactly 16 and more with an EER rating of 13 and more.
Packaged systems on the other hand, need to meet SEER ratings of 14 and more with EER ratings needing to be at 12 or more. Air conditioners should fall under Energy Star Most Efficient.
What are some requirements in terms of where the air conditioner is installed?
In order to be successful in your application for tax credit, there are also some requirements in terms of determining where your air conditioner is installed. In this case, your home needs to qualify for tax credit too.
The tax credit will only apply to energy efficiency improvements to residential properties only, with the requirement that the air conditioner is installed in your primary residence and not a vacation or second home or commercial property. Tax credit will also only be available on an existing home, and not a new construction.
Conclusion
The tax season can be an extremely frustrating one for the taxpayer, and it is one of the most stressful times of the year having to complete and file your tax returns on time. Fortunately, it is not all gloom, as tax credits offer you benefits like reduced tax.
Tax credits can also be applied for if a taxpayer has a qualifying air conditioner and home that meets all the requirements for tax credit. Tax credit is typically around $300 and does not exceed $500. Either way, this gives taxpayers some relief as they have some tax money deducted.