The Bipartisan Budget Act of 2018 reinstated the tax credit for fuel cells, solar energy systems, small wind turbines, and geothermal heat pumps. The renewable energy tax credit features a gradual step down in the credit value.
25C high-efficiency heating and cooling equipment federal tax credits are available for qualifying central air conditioners; heat pumps; packaged units; ductless mini-split systems; and furnaces and boilers.
This guide explains the federal energy tax credits and your eligibility.
What Equipment Qualifies for the 2020 Federal Energy Tax Credit?
There are three types that are supported by the program.
These include solar fuel cells and solar energy systems.
Photovoltaic systems are the most popular type of these. The panels are built using crystalline photovoltaic cells. Panels are mounted wherever most convenient – the roof, ground or in some cases the side of a building. These are energy efficient and a good value given their cost, which is becoming more competitive.
BIPV (Building-Integrated Photovoltaic) technology is a growing field. As the term means, the panels or cells are smaller and integrated into the roof covering along with asphalt shingles or other roofing types. Popular brands are:
CertainTeed Apollo II shingles and tiles
SunTegra shingles and tiles and
RGS Powerhouse shingles, begun by Dow but now owned by RGS Energy.
Cost: Prices have dropped to a range of about $2.60-$3.25 per watt for traditional solar panel PV systems. That means a 6,000 watt (6kW) system would cost about $16,000 – $18,000.
Residential-scale wind turbines and similar equipment that generate electricity for your home. Look for equipment that has been certified by the National Wind Technology Center (best) or a one of a few regional certification centers.
The information is spelled out for you by the US DOE in this useful post.
Cost: According to Bergey Windpower, a 10kW system costs between $65,000 and $95,000, but many homes sustain less energy usage. Most homes require 5kW to 8kW to operate.
Called heat pumps or ground-source heat pumps, as opposed to the more common air-source equipment.
Geothermal heat pumps get their heat from the ground – and dump heat there too in air conditioning mode. They are far more efficient than air-source heat pumps, hence the offer of tax credits.
Depending on site locations, your land will be best suited to one of several designs – closed loop or open loop, either spread out horizontally or going deep vertically. Costs vary, with deep well systems usually costing more. System size impacts cost too.
Here’s a good starting point for learning more about geothermal.
Cost: Starting at about $9,000, most geothermal systems cost $12,000 to $20,000. A few exceed $25,000.
Federal Renewable Energy Credits for 2020
26% for systems placed in service after 12/31/2019 and before 01/01/2021
22% for systems placed in service after 12/31/2020 and before 01/01/2022
The 25C Federal Tax Credit for High-Efficiency Heating and Cooling Equipment includes:
Reimbursement up to 10% of the cost, up to $500; or a specific amount from $50 to $300;
$300 maximum credit for qualifying equipment.
$150 maximum credit for Furnaces and Boilers.
High-Efficiency Heating and Cooling Equipment
Equipment types that qualify for the 25C Federal Tax Credits are:
- Central Air Conditioners
- Heat Pumps
- Packaged Units
- Ductless Mini-Split Systems
- Furnaces and Boilers
Equipment must be installed in your main home in the United States; rentals and new construction do not qualify. The 25C tax credit has additional limitations; homeowners are advised to consult with tax advisors for applicability.
IRS Form 5695 for Residential Energy Credits
IRS Form 5695 is a single-page form.
Here is the link to IRS Form 5695 for 2020 taxes.
Here is a link to the instructions for Form 5695.