Stewart also points out other benefits: better warranties and lower utility bills. High-efficiency A/C units are better at dehumidification, Swilik says, and it’s easier to set up zones in the house for increased efficiency and comfort.
In addition to the tax credits, homeowners can also take advantage of HVAC manufacturer rebates and contractor discounts and incentives.
However, Bill Cunningham, cooling product manager at Lennox, says that if dealers are involved in offering these “instant discount” rebates, they need to keep in mind that deducting the rebate amount off the invoice could potentially lower the amount of the credit that a taxpayer can claim.
“Contractors like us do pre-season pricing to help drive sales,” Tucker says. “Now with rebates, tax credits, and contractors, it’s the right time to purchase equipment — all the stars have aligned.”
Precision Air Conditioning & Heating worked with two financing companies to offer its customers 12 months same-as-cash programs on tax credit–qualifying systems. “We’d like to make it easier for people to do business with us,” Stewart says.
Waiting for Clarification
SIX-WEEK GAP: Homeowners may be able to claim the credit for equipment installed from Jan. 1, 2009 to Feb. 17, 2009 that qualified under a previous bill (see “Taking Credit” LINK TO ARTICLE). For HVAC equipment, here are the previous standards that could be eligible:
- Gas, oil, or propane furnaces or boilers with minimum of 95% AFUE
- Central air conditioning:
Split: minimum of both 15 SEER and 12.5 EER; package systems: minimum of both 14 SEER and 12 EER.
- Electric heat pumps: 15 SEER, 13EER, and 9 HSPF.
- Advanced main circulating fans: annual electricity use of no more than 2% of total annual site energy use of the furnace.
ADVANCED MAIN AIR CIRCULATING FANS: The IRS has yet to clarify an issue with this item, which is listed as qualified for the tax credit.
An advanced main air circulating fan, also known as an ECM fan, is a variable-speed blower fan used in gas, propane, or oil furnaces. For the previous tax credits in 2006 and 2007, homeowners who installed a furnace with this high-efficiency fan received an additional $50 credit, added to the $150 credit for the qualified 95% AFUE furnace. If the furnace was below the qualified 95% AFUE, but still had this fan, the homeowner could only take the $50 credit for the high-efficiency fan. For 2009, the advanced air circulating fan is still listed as a separate item that qualifies for the 30% credit under the $1,500 cap. However, says Charlie McCrudden, vice president of government relations for the
Air Conditioning Contractors of America (ACCA), some homeowners could claim that an 80% AFUE furnace equipped with the ECM fan qualifies for a credit of the full 30% of the cost of the furnace up to the $1,500 cap.
In response to a question about this on its website, Energy Star says: “If the fan is qualified, but the furnace is not, you will most likely NOT be able to take 30% off the cost of the entire furnace. This FAQ will be updated as soon as the IRS issues guidance on this issue.”
Billing
ACCA has also asked the IRS for clarification on whether homeowners can claim the full invoice for an HVAC installation, even if some of the equipment does not qualify. “If a contractor installs a qualified furnace but unqualified A/C, does the IRS need an itemized invoice? How does the taxpayer treat the situation with multiple installations, some qualified, some not qualified? What can they claim?” McCrudden asks.
This could happen for certain geographic locations, he says. For example, in Michigan where it is cold, it makes sense to install a 95% AFUE furnace, but an owner might not choose to pair it with a 16 SEER A/C. Most HVAC contractors provide a single invoice for the full installation and may want to avoid itemization. However, Stewart considers itemizing for tax credits part of her company’s customer service. She says that another option is to create two separate invoices. —Nina Patel, senior editor, REMODELING.
BOTTOM LINE
The tax credit applies to both the materials and installation of HVAC systems. HVAC manufacturers, contractors, and homeowners are encouraged by the higher $1,500 cap, compared with 2005 HVAC tax credits, which had lower efficiency levels and a cap of $500. The IRS may allow homeowners to claim the higher $1,500 tax credit for 2007 level equipment installed from Jan. 1, 2009 to Feb. 17, 2009. (See “Six-Week Gap” in the Waiting for Clarification section ABOVE)
Many manufacturer websites have lists of qualifying equipment. In addition, the Air-Conditioning, Heating, and Refrigeration Institute has a directory ( www.ahri.org) where contractors can enter specifications and confirm that equipment meets the standard.
Local Look: States Weigh In
MINNESOTA: Homeowners have access to additional rebates and loan programs. Xcel Energy, in Minneapolis, has offered air-conditioning rebates to customers for the past 15 years. In a recent update, the program now requires quality installation of air conditioners and air-source heat pumps to earn the rebate.
The utility says that according to industry field research, 50% of A/C units are not properly sized or installed. “We tell our customers that an improperly installed system could cost them up to 25% more on utility bills,” says Jean Hammer, product portfolio manager at Xcel. Homeowners need to hire one of the 500 contractors who have passed a test and registered with Xcel. The contractor fills out an application for a project and submits it to Xcel.
In 2007, 6,000 homeowners received rebates, and in 2008, the number was 8,200. Hammer expects the count to reach 9,000 in 2009. The utility offers a $180 rebate for 14 to 14.9 SEER A/C units, $280 for 15 to 15.9 SEER, and $330 for 16+ SEER. Hammer expects the higher efficiency levels for federal tax credits to positively affect Xcel’s program. “Fourteen SEER is the most popular. We’d like to see that move up to 15 and 16, and the federal program will be an enormous help,” Hammer says.
Utility company rebates are likely to increase in Minnesota in response to a 2008 law that requires utilities to reduce overall energy use by 1.5% starting in 2010.
In addition to utility rebates, some Minnesota homeowners have access to low-interest loans. The nonprofit Center for Energy and Environment (CEE) administers low-interest home improvement programs set up by Minnesota state and various cities. CEE works with about 100 programs with varied requirements: some provide only energy-improvement loans, others provide loans for any type of upgrade, and some ask owners to work with CEE to prioritize the improvements. Most require owners to provide a bid for the work.
“Contractors love this service,” says Erica Graber-Mitchell, CEE’s community relations manager. “When they go out and provide a bid, based on where that person lives, they can hand out information on financing.” She says that in some cases CEE pays the contractor, while in other cases CEE gives the funds to the homeowner. —Nina Patel
Doing It Right: Finding the HVAC Best Fit
EFFICIENCY LEVELS: HVAC consultant Jim Firszt points out that air conditioning equipment must meet both the SEER and EER to qualify. “If it meets 13 EER, it will automatically meet 16 SEER. But not the other way around,” he says.
FURNACE CHOICE: According to Firszt, the 95% efficiency level for a gas furnace is easiest to reach, but it’s not always the best choice, based on climate. “In the northern states, [clients] get their money back sooner, but for southern states, A/C or heat pumps are better.”
SYSTEM COMBINATIONS: Contractors need to install the right combination of HVAC equipment to meet the efficiency levels. For example, matching the A/C condenser outside with the right furnace or air handler inside.
SPACE CONSIDERATIONS: John Hurst, vice president of product management with Richardson, Texas–based Lennox, says that many product installations have space constraints, particularly for the furnace and air handler. Local codes governing chimney size for venting and make-up air will also affect installation parameters. Frederick Air sales manager John Poyle offers an example: “If my house has a 3-ton air conditioner, and I want a 20 SEER unit, a manufacturer will say, this unit comes up to 20 SEER. But I may need a 5-ton coil to get that 20 SEER efficiency from the unit. But that coil is massive and won’t fit in my basement because of the low ceiling.”
To choose the best solution for the customer, make sure that the HVAC contractor reviews existing conditions, including the orientation of the house, shading, and existing insulation, as well as lifestyle considerations such as how the customer uses the system and what changes they plan for the future.
Include the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) number in the invoice and manufacturer certification. —Nina Patel