Only five active models listed in the 2005 Consumer’s Directory of Certified Efficiency Ratings meet 95% AFUE as of August 15, 2005. Since then, Goodman & Amana have added a new lines of gas furnaces that will meet this 95% rating. A total of 21 active models will qualify for the tax credit and 20 of those model are either Amana or Goodman.

Also, a separate tax credit of $50.00 for the furnace’s ECM variable speed motor makes the total tax credit $200.00 on furnaces that have the variable speed motor. Even 80% furnaces that have the ECM variable speed motor will qualify for the $50.00 tax credit.

Purchasers of highly efficient heating, cooling, and water heating equipment can take tax credits of up to $300 for purchasing qualifying equipment, as detailed below. These credits are available for systems placed in service from January 1, 2006, through December 31, 2007. There is a $500 cap on the credit per home, including the amount received for insulation, windows, air and duct sealing as described in the previous section.

What types of equipment qualify and for how much?

• High-efficiency gas, oil, and propane furnaces and boilers: $150
• High-efficiency central air conditioning units, including air-source and ground-source heat pumps: $300
• High-efficiency fans for heating and cooling systems: $50
• High-efficiency water heaters, including heat pump water heaters: $300

Where must the equipment be used?

Under guidance issued by the IRS, equipment is eligible if installed in a home occupied by a taxpayer as their principal residence at the time the equipment is installed. This implies that equipment in new homes is generally not eligible since new homes equipment is generally installed prior to occupancy. However, efficient equipment in new homes will help that home qualify for the new home tax credit.

What are the efficiency requirements to qualify for the credits?

Manufacturers and retailers should be able to help you tell whether a specific product qualifies. The qualification specifications are:

• Furnaces and boilers: Annual Fuel Use Efficiency (AFUE) 95 or higher
• Central air conditioning units:
  • Central air conditioning units must meet the highest tier standards set by the Consortium for Energy Efficiency (CEE), which require a Seasonal Energy Efficiency Ratio (SEER) of 15 and an Energy Efficiency Ratio (EER) or 12.5 for split systems (those with separate indoor and outdoor units) and SEER 14 and EER 12 for single-package systems (typically located on a roof). SEER measures performance throughout the cooling season, EER measures performance on a very hot day.
  • Air-source heat pumps must have a Heating Seasonal Performance Factor (HSPF) 9 or greater, SEER 15 or higher, and EER 13 or higher
  • Ground-source heat pumps must meet the following criteria (the same criteria as for Energy Star):
    • Closed-loop systems—14.1 cooling EER and 3.3 heating Coefficient of Performance (COP)
    • Open-loop systems—16.2 EER and 3.6 COP
    • Direct-expansion systems—15 EER and 3.5 COP

  In addition, ground-source heat pumps must include a desuperheater (which preheats water for a water heater) or an integrated water heating system.

• Fans for heating and cooling systems: fan uses no more than 2% of total heating system energy use, as defined by DOE test procedure
• Water heaters:
  • Gas or propane water heaters—Energy Factor of at least 0.8. The only models that meet this standard currently are tankless water heaters and some systems that combine both space and water heating.
  • Heat pump water heaters—Energy Factor of at least 2.0

What do I need to do to qualify for the incentives?

Under the IRS rules, manufacturers need to certify that specific measures are eligible. Homeowners should obtain a copy of this certification when buying these products from the manufacturer, contractor or retailer. Certifications need not be submitted to the IRS, but should be kept on file in case the IRS has questions. Homeowners should also make notes on when each eligible measure is installed- only measures “placed in service” in 2006 and 2007 are eligible.