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As luck would have it, my 20 year old air conditioning unit needs to be replaced.  I’ve been shopping and learning about air conditioners for the past two weeks and have finally decided on a 16 SEER unit with a 10 year warranty.  The minimum rating the Federal Government will allow to be installed in a personal residence is 13 SEER.  I had no idea the government could dictate the energy efficiency Americans must have in their air conditioning units.  However, I won’t deviate from the topic at hand to express my opinion of government regulations.

Tax Credit

In an effort to reduce the sting of paying for a new HVAC, the Internal Revenue Code offers a federal tax credit through the end of 2013 of 10% of the cost up to $500, or a specific amount from $50 – $300, on certain energy improvements to your personal residence.  In order to qualify for the credit, the air conditioner must meet the following efficiency requirements:  16 SEER / 12.5 EER / 8.5 HSPF.  The maximum credit available for a new air conditioner meeting the requirements is $300.

Cumulative Limit

The credit in 2013 cannot exceed the cumulative limit of $500 for all tax credits claimed for 2006 – 2013.  If you have made other home improvements eligible for the energy tax credits and you have already received tax credits of $500 or more, you will not qualify for a credit in 2013.

I’ve made quite a few home improvements over the years; however, I have only made one improvement that qualified for the energy credit and it was well under the $500 cumulative limit.  I believe I will be able to claim the $300 energy credit on my 2013 for the new air conditioner.  When the new unit is installed later this week and I have to pay for it, I’ll be keeping that small credit in mind.

Claiming the Credit

File IRS Form 5695 with your 2013 tax return to claim the credit.  You are required to have proof in the form of a signed statement from the manufacturer certifying the product qualifies.  You do not have to send the documentation with the return; however, upon audit, you would be required to show the proof to the examining IRS agent.