Can I Deduct A New Air Conditioner On My Taxes?

If you’re thinking about replacing your old AC unit with a new energy-efficient cooling system, you may be asking yourself, “Can I deduct a new air conditioner on my taxes?” Chances are you are eligible for federal tax credits!

Depending on the efficiency level and the equipment you buy, you may qualify for extra savings such as up to 9% tax credit of the equipment’s cost if you’re having a solar-ready air conditioner before December 31, 2021. Add to that the 22% credit on the installation and solar module cost that you can get (to generate electricity for your AC unit components). Note, however, that both tax credits apply to second and principal residences but not rental properties.

What Tax Credits Can You Benefit From?

Besides the ones already mentioned above, Congress has recently renewed Section 25C of the tax code (aka Nonbusiness Energy Property Tax Credit), allowing those who install an energy-efficient HAV appliance such as a boiler, heater, mini-split, or air conditioner to get up to $500 in tax credits. You may also reap the benefits of this federal rebate incentive even if you’ve installed a qualifying AC unit over the past 48 months.

Although there;s no guarantee that these credits will be around for long, homeowners can grab them while they last and upgrade their home with an Energy Star-certified air conditioner. Beware as choosing an AC model that does not meet the Energy Star requirements will NOT get you qualified for the tax credits. That’s why it’s best to do business with a licensed and certified contractor to stay away from trouble.

Important Notes on the Tax Credits

• The Nonbusiness Energy Property Tax Credits are only available to homeowners who install a new AC unit in an existing home – rentals and new construction homes are out.

• If you qualify, expect either the set prices or 10% of the cost up to $500. Also ensure you have details, such as the Manufacturer’s Certification Statement, when you apply to show the AC unit’s efficiency ratings.

• To apply for the tax credits, you will need to fill out a standard IRS document called Form 5695. 

• The particular tax credit works pretty much like any other tax credit. The sum of the tax credit goes against the owed sum.

• If, at the end of the year, you owe less in taxes than the credit, you will most likely qualify for a refund.

• According to stats from the National Institute of Standards and Technology, 50% of HVAC equipment is not installed properly, leaving AC units operating at less than 60% of their labeled efficiency. Ensure you have yours installed correctly to get your money’s worth.

Conclusion

These are tax credits that apply to USA taxpayers. However, many other countries have similar incentives to motivate homeowners to install energy-efficient air conditioners. Check what is available in your country and apply if you meet the qualifying criteria. You might be surprised by the availability of the programs you can apply for. For example, in Greece, you can have up to 40% back of the costs related to upgrading your home and making it more energy-efficient.