Federal Energy Efficiency Tax Credits
25D (Expires 2016) Tax Credits

The Energy Improvement and Extension Act of 2008 (H.R. 1424) extended the section 25D tax credit to geothermal heat pumps, effective January 1, 2008. In February of 2009, the credit was further enhanced by the American Recovery and Reinvestment Act of 2009 (H.R. 1) which removed the maximum credit amount for all eligible technologies placed in service after 2008.

A taxpayer may claim a credit of 30% of total investment for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home.

A geothermal heat pump must meet federal ENERGY STAR criteria that are in effect at the time of the expenditure and includes heating only and cooling only products. Currently, ENERGY STAR criteria for geothermal heat pumps are as follows:

Water-to-Air Closed Loop: EER >= 17.1  and/or COP >= 3.6
Water-to-Air Open Loop: EER>= 21.1  and/or  COP>=4.1
Water-to-Water Closed Loop: EER >= 16.1 and/or COP>=3.1
Water-to-Water Open Loop: EER>=20.1  and/or COP>=3.5
Direct Expansion: EER>= 16   and/or COP >= 3.6

Go to either the Water-to-Air and Brine-to-Air Heat Pumps or DirectGeoexchange Heat Pumps directories and select Yes for 'Eligible for Federal Tax Credit'

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25C Residential Tax Credits

The information below applies to qualified products installed from January 1, 2012, to December 31, 2013.

Background: On January 2, 2013, President Obama signed legislation extending the following tax credits through December 31, 2013.

Tax Credit Details for Homeowners:

  • The efficiency levels required reflect the highest tier of the CEE High-efficiency Specification for Residential HVAC Systems as of January 1, 2009. Please note: Equipment listed in the chart below (except water heaters, which only needs to achieve one of the efficiency specifications) must meet all performance specifications for its category. For example, a tax-credit eligible split central air conditioner must have stated performance ratings of 13 EER and 16 SEER.
  • Improvements made in 2012 will be claimed on your 2012 taxes (filed by April 15, 2013)
  • The lifetime credit cap of $500 was reinstated. If you have claimed more than $500 in 25C tax credits since January 1, 2005, you are disqualified from any further credits

Product Type Tax Credit Specification Tax Credit Effective Date Find Qualifying Equipment
Residential
Central A/C
Split:
EER>=13
and SEER>=16
Packaged:
EER>=12
and SEER>=14
The tax credit is for $300 January 1, 2012 – December 31, 2013 Go to:
Air  Conditioners and Air Conditioner Coils or Variable Speed Mini-Split and Multi-Split Air Conditioners and select Yes for 'Eligible for Federal Tax Credit'.
Residential Air-Source Heat Pumps Split:
HSPF >= 8.5
and
EER >= 12.5
and
SEER >= 15
Packaged:
HSPF >=8
and
EER >= 12
and
SEER >= 14
The tax credit is for $300 January 1, 2012 – December 31, 2013 Go to:
Heat Pumps and Heat Pump Coils or Variable Speed Mini-Split and Multi-Split Heat Pumps and select Yes for 'Eligible for Federal Tax Credit'.
Residential Gas, Oil, Propane Furnace or Hot Water Boiler Furnaces:
Gas >= 95% AFUE
Oil >= 95% AFUE
Propane >= 95% AFUE
Boilers:
AFUE>=95
The tax credit is for $150 January 1, 2012 – December 31, 2013 Go to:
Boilers / Furnaces and select Yes for Tax Credit Eligible under Advanced Search.
Advanced Main Air Circulating Fan No more than 2% of furnace total energy use. Read this IRS Guidance if the fan qualifies, but the furnace does not. Read AHRI Safe Harbor Proposals to IRS. The tax credit is for $50 January 1, 2012 – December 31, 2013  
Residential Gas, Oil, Propane Water Heater Energy Factor
>= 0.82
or
Thermal Efficiency
>= 0.90
The tax credit is for $300 January 1, 2012 – December 31, 2013 Go to:
Residential Water Heaters or Commercial Water Heaters and select Yes for Tax Credit Eligible under Advanced Search
Residential Electric Heat Pump Water Heater  Energy Factor >= 2.0 The tax credit is for $300 January 1, 2012– December 31, 2013 Go to:
Residential Water Heaters/Commercial Water Heaters and select Yes for Tax Credit Eligible under Advanced Search


A Manufacturer’s Certification is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.


How to Obtain the Tax Credit
Eligible contractors need to fill out IRS Form 8908 to get the tax credit. The IRS has provided the following guidance regarding the tax credits for constructing energy efficient new homes available under the Energy Policy Act of 2005:

IRS Notice 2006–27 provides guidance for the credit for building energy efficient homes other than manufactured homes.

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