The California Furnace Tax Credit: An FAQ for Homeowners

California furnace tax creditOver the many years that I’ve lived here in California, I’ve had my fair share of friends who decided, for some crazy reason, to move out of the state. I mean, I guess I understand moving to the Bay Area or Southern California (sort of), but out of state?! These guys and gals often come back to visit and, when they do, they pretty much all say that it feels really great to be home—and that they have a keen new awareness of what makes Sacramento, and the rest of California, so different from any other state in this great country.

These Californian ex-pat folks tend to mention our ample supply of palm trees, our many bike lanes, our wineries, our pine forests, and our temperate weather. Often, we also get to talking about work, as old friends do, and so I end up also mentioning things from my heating and cooling service experience, like the California furnace tax credit. See, California does a great job creating financial incentives, like tax credits, for homeowners who want to make their houses, specifically HVAC and insulation, as environmentally friendly as possible.

The California furnace tax credit helps homeowners who have stayed rooted in the Golden State save some serious money. That’s why it’s so important to know the ins and outs of what this tax credit is, how you can qualify, and which upgrades you should consider to take full advantage of it.

What Is the Most Common California Furnace Tax Credit Program?

The easiest and most common way to get a furnace tax credit in California is to purchase a high-efficiency HVAC or heater to qualify for the Energy Upgrade California Home Upgrade program, which offers you between $1,000 and $6,500 back for taking a whole-house approach to energy efficiency.

California tax credit for new furnace installationI’ve talked about the whole-home concept quite a bit in the past, but for those of who you still aren’t familiar, it involves making energy efficiency upgrades to all the appliances, etc. that affect how much power has to be used to cool or heat your home. This list includes your furnace, but also your air conditioner, water heater, windows, insulation, and air ducts; basically, anything that conditions your home’s air or seals it in.

Which Furnace Models Qualify for a California Tax Credit?

It can be tough for the average homeowner to pinpoint eligible furnace models since the list is always changing, but my general advice is that if you have a furnace that’s been around for more than 15 years, any new furnace on the market today will have a higher efficiency rate—and efficiency is the key to qualifying.

Just look at all the stats. The average 20-year-old furnace has an annual fuel utilization efficiency, or AFUE, of .78 or lower, according to the U.S. Department of Energy, with AFUE being the basic energy efficiency rating system we use. A .78 AFUE furnace means it uses only 78% of the energy it consumes to heat air that makes it into your home, while the other 22% is lost to inefficiency. Now, on average, a new furnace has a 95% AFUE, making it roughly 17% more efficient than a 20-year-old furnace.

Here are two general options for replacing an old furnace with a higher efficiency model that qualifies for a California furnace tax credit:

  • Energy Star-labeled furnaces: Any new furnace that has an Energy Star label on it has an AFUE of .90 or higher, qualifying it for a California furnace tax credit. These furnaces use energy more efficiently, which also gives you immediate savings on your heating bills. And, furnaces in this 90% efficiency range have sealed combustion chambers that pose fewer safety risks related to carbon monoxide and flame rollout. Basically, it’s a win-win-win scenario.
  • Heat pumps: An alternate route in a temperate area like ours is investing in an electric heat pump. I’ve talked in the past about heat pumps versus gas furnaces and why they’re a good fit for Northern California but, basically, electric heat pumps draw heat from outside air and move it into your home. The right models will also have Energy Star labels, making them easy to identify.

How Much Can I Earn with a California Furnace Tax Credit?

I noted this above, but since the dollar amount is the most important factor in most decisions that homeowners make, I’ll mention it again. California tax credits can help you earn between $1,000 and $3,000 for basic upgrades—and as much as $6,500 for more advanced savings measures that take the whole-home energy efficiency approach.

The process of qualifying for tax credits and incentives can be difficult for someone who hasn’t had to navigate them before. A local, professional HVAC contractor can take care of a lot of this for you, though…

The key, in my opinion, is to make sure you enlist the help of a knowledgeable HVAC service tech who has navigated these somewhat murky waters before. The process of qualifying for tax credits and incentives can be difficult for someone who hasn’t had to navigate them before. A local, professional HVAC contractor can take care of a lot of this for you, though, ensuring that you not only find a perfectly-calibrated furnace model for your home, but that it qualifies for incentives and is installed properly for greatest efficiency as well.

There are, without question, plenty of great reasons to live in California. The fun and sun and glamour often steal the show. Furnace tax credits may not often get the spotlight, but they are a practical and smart way to save money.

If you’re in the market for a furnace replacement, or you’re looking to make an investment in your home that will simultaneously save you money and make it better for the environment, I strongly recommend contacting Bell Brothers today to get an estimate for an HVAC replacement. We’ve been doing this for decades—and we love California as much as you do.

Contact the HVAC professionals at Bell Brothers to schedule a whole-house assessment for energy efficiency. We’ll offer recommendations and upgrades that are sure to increase your year-round comfort—and decrease your power bills.

Wondering how to finance a new HVAC system, windows, or plumbing? HERO is a unique financing option that helps California homeowners afford energy efficient upgrades to their home. Contact Bell Brothers, a HERO-approved contractor, to learn more. Our local HVAC, plumbing, and window specialists will walk you through the entire process, from applications to installation.

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