When tax season comes around, anything that can help your bottom line is a plus. For homeowners, looking into house-related purchases can often lead to tax savings. For example, there are federal HVAC tax credits you may qualify for. Here’s our breakdown of how to get a tax credit for your furnace and more.

What is Energy Star?

The best place to start when looking into federal HVAC tax credits is Energy Star. This program, which is run by the Environmental Protection Agency (EPA) and the US Department of Energy (DOE), provides various consumer products with a government-backed symbol denoting energy efficiency. 

Products that have earned the Energy Star label have been independently certified as energy-saving solutions. Not only are these products EPA-approved, but when you buy them for your home, they also can qualify you for federal HVAC tax credits. 

Furnace HVAC tax benefits

There are two types of tax benefits you can get through Energy Star, and many of them have been extended through 2023. 

The first type of benefit is a Renewable Energy Tax Credit, which only covers installing a new geothermal heat pump. You can potentially receive the following tax credits for a new geothermal heat pump:

• 30% for systems placed in service by 12/31/2019
• 26% for systems placed in service after 12/31/2019 and before 01/01/2023
• 22% for systems placed in service after 12/31/2022 and before 01/01/2024

The second credit to keep an eye out for is Equipment Tax Credits for Primary Residences. This tax credit is specifically for homeowners and for equipment that has been installed on or before December 31, 2022. In some cases, you can qualify for federal HVAC tax credits like:

• $150 tax credit for an Energy Star certified furnace
• $300 tax credit for an Energy Star certified air source heat pump

Energy Star Approved Furnaces

Not just any old furnace qualifies for the federal HVAC tax credit. You’ll need to install a specific kind in order to get the benefits. Right now, there are two types that meet the standard.

1. Geothermal heat pumps
   Geothermal heat pumps work by using electricity to pump warm air to cold places and vice versa. Drawing their heat source from the ground or groundwater, they are incredibly energy-efficient and eco-friendly. This is the only type of heat pump that qualifies for the Renewable Energy Tax Credit.

2. Air source heat pumps
   Air source heat pumps draw in air from the outdoors and heat it using electricity before blowing it into your home. This is a very similar process to how a furnace heats your home, but using electricity as the source of heat makes it more energy efficient. However, that energy efficiency means it may not always be the right solution for your Minnesota home, so be sure to consult with an expert before installing one.

3. Gas furnace
   An Energy Star certified gas furnace can also be an energy efficient way to heat your home. Gas furnaces also tend to cost less to run than a heat pump and can last around 20 years before you need to replace them. At Welter, we favor Trane gas furnaces for these very reasons.

Whatever heating system you buy must have the official Energy Star approval to qualify for federal HVAC tax credits. Look for the blue Energy Star logo on the product to confirm. 

How to apply for furnace tax credits

In order to claim the credits, you’ll need to fill out IRS Form 5695 – Residential Energy Credits. Instructions for how to fill out this form can be found here. If you need help with this form, talk to your accountant or other tax professional so they can guide you through the process. 

Installing Savings

If energy efficiency is part of your tax plan, Welter Heating is here to help! Whether it’s installing or maintaining our gas furnace, our experts will guide you through the process. Give us a call today!