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How California Tax Credits Work For ACs and Furnaces

Purchasing a new HVAC system is expensive—especially if you opt for high-efficiency equipment. That said, many California homeowners choose high-efficiency equipment because it reduces long-term energy costs and it’s better for the environment.

If you want a high-efficiency AC or furnace but you’re concerned about the upfront cost, we have good news: A federal tax credit and state-wide incentives can reduce the upfront cost of your new high-efficiency HVAC system.

In this blog, we’ll share:

Let’s begin by looking at the federal tax credit.

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The federal tax credits available to you

The U.S. government currently offers a tax credit to homeowners who install high-efficiency heating and cooling equipment.

The federal tax credit for high-efficiency HVAC equipment applies to Energy Star-certified systems:

  • Energy Star-certified central air conditioners and heat pumps quality for a $300 tax credit
  • Energy Star-certified gas furnaces quality for a $150 tax credit

You can visit Energy Star's product database to see if a particular AC, heat pump, or furnace is Energy Star certified. After you install the qualifying equipment, you can claim the tax credit on your federal return.

Each of these credits will expire on December 31st, 2021, so you should act soon if you need a new furnace or air conditioner. We’ll also point out that these tax credits only apply to your principal residence and do not apply to new home builds or rentals.

California state incentives for ACs and furnaces

While California does not currently offer a state tax credit, several utility companies offer incentives that can reduce the upfront cost of your HVAC equipment.

Below is a snapshot of various rebate programs throughout the state:

You can contact your utility provider directly to find out the rebates they offer for new HVAC systems. Additionally, you can search Energy Star’s rebate finder database to find other rebates available in your zip code.

The contractor you hire to install your HVAC system can also help you determine which rebate programs you qualify for.

Other ways to save on upfront HVAC equipment costs

In addition to the federal tax credit and utility incentives we listed above, you can also reduce the cost of your HVAC equipment by taking advantage of manufacturer rebates and contractor promotions. We’ll explain how below.

Manufacturer rebates

Many of the major HVAC equipment manufacturers offer seasonal rebates on select systems. For example, earlier this year, Lennox® ran a spring promotion where they offered up to $1,600 in rebates for customers who purchased a new gas furnace, AC or heat pump, and thermostat.

You can visit a manufacturer’s website to learn more about available promotions or ask your HVAC installer about current manufacturer rebates.

Contractor promotions

HVAC contractors also offer seasonal promotions that discount the installation cost of a new heating or cooling system. Contractors usually advertise these promotions during spring and fall, when HVAC demand is lower and business is a little slower.

Ask your local HVAC company about any current promotions they offer for new equipment installations. (You can see some of our current promotions on our coupons page.)

Need a cooling or heating system for your California home?

Contact True Home Heating and Air Conditioning today. We’ll dispatch one of our licensed project managers to your home to recommend a new HVAC system. Your project manager can help you determine which rebates and utility incentives you can use to lower the equipment cost.

Learn more about our services by visiting the following pages: