High-Efficiency AC Rebates and Tax Credits

Searching for ways to lower the cost of a new air conditioner? The short answer is yes—there are federal tax credits and regional rebates for high-efficiency AC systems, and the amounts can be significant if your equipment meets specific efficiency standards. Below is a clear guide for homeowners and property managers in Southern California on what qualifies, how much you could receive, how to claim benefits, and why professional installation is essential for safety, insurance, and long-term performance.

What counts as a high-efficiency AC?

“High-efficiency” typically means your central AC or ductless mini‑split meets current ENERGY STAR and/or CEE (Consortium for Energy Efficiency) tier criteria for your region. Programs use updated SEER2 and EER2 ratings, and they evaluate the matched system—not just the outdoor unit. You will need the AHRI certificate number for the exact indoor/outdoor combination you install. This document is often required to qualify for rebates and tax credits.

• ENERGY STAR Certified equipment is a common baseline for rebates.
• For the federal tax credit, qualifying central AC must meet the CEE highest tier in your region.
• Matched equipment and professional commissioning matter for eligibility.

Federal tax credits for AC (Inflation Reduction Act, Section 25C)

How much can you get?

• Central air conditioners: Up to 30% of project cost, capped at $600 for qualifying AC equipment.
• Annual limits: Most building-envelope and AC/furnace items are capped at $1,200 per tax year.
• Heat pumps: A separate $2,000 cap applies to qualifying heat pump systems, which can raise the total yearly credit up to $3,200 when combined with other eligible items.

These credits currently run through 2032. Programs evolve, so always confirm current IRS guidance or consult a tax professional.

Eligibility checklist

• Qualifying equipment that meets ENERGY STAR/CEE criteria for your region.
• Matched system with an AHRI certificate.
• Installed in a U.S. primary residence and placed in service during the tax year.
• Paid out-of-pocket cost (credits are generally calculated on what you paid after point-of-sale rebates).

How to claim the federal credit

1. Collect documentation: itemized invoice, AHRI certificate, and manufacturer’s certification statement.
2. File IRS Form 5695 with your federal tax return for the year the system was placed in service.
3. Keep records in case of audit and verify rules with a qualified tax advisor.

State and utility rebates in Southern California

California utilities and municipal programs frequently offer rebates for high-efficiency AC and, even more often, for heat pumps and mini‑splits. Availability and amounts change, but common providers in our area include:

• SCE (Southern California Edison)
• LADWP (Los Angeles Department of Water and Power)
• Burbank Water & Power, Glendale Water & Power, Pasadena Water & Power
• Anaheim Public Utilities and other Orange County providers
• Riverside Public Utilities (Western Riverside County)

Typical requirements may include:

• ENERGY STAR Certified or CEE tier equipment (SEER2/EER2 thresholds vary by program).
• Closed permits and final inspection.
• AHRI certificate for the matched system.
• Professional installation and proof of commissioning/testing; some programs require HERS verification.

California is also rolling out state-administered rebates funded by the Inflation Reduction Act. These programs can phase in by income level and may prioritize electrification (heat pumps). Check current status because launch dates, eligibility, and funding levels change.

Heat pump vs. central AC incentives

Although this article focuses on AC, note that incentive levels are often higher for heat pumps and ductless mini‑splits. If your project could benefit from heating plus cooling, a high-efficiency heat pump may unlock larger rebates and the $2,000 federal tax credit cap described above.

Can you stack incentives?

In many cases, yes. Federal tax credits can typically be combined with state or utility rebates. However, point-of-sale rebates reduce your out-of-pocket cost, and your federal credit is usually based on what you actually paid. Read each program’s rules to avoid double-counting the same dollars. Some rebates cannot be combined with other specific incentives, and funding can run out.

Why professional installation matters

• Safety and code: Refrigerant handling, high-voltage wiring, and duct pressure balancing require licensed expertise and proper permits.
• Performance: Correct load calculations, duct design, airflow settings, and commissioning protect efficiency and comfort.
• Warranty and insurance: Manufacturers and insurance carriers often require licensed installation and documentation. DIY or unpermitted work can void warranties and jeopardize claims.

At #1 AC Guys, we are a fourth-generation family of engineers serving Los Angeles County and nearby areas, including Orange County, Ventura County, and Western Riverside County. With 80+ years in engineering, we specialize in commercial and residential HVAC, especially large and complex projects. Our team has factory training with Fujitsu (Japan), Mitsubishi Elektrik (Thailand), Midea (China), Gree (China), and Hier (China). Our mission is simple: healthy air at home for a healthier life.

Service areas and example cities

We serve the greater Southern California region, including Los Angeles County (Los Angeles, Long Beach, Santa Clarita, Pasadena, Glendale), Orange County (Anaheim, Irvine, Santa Ana), Ventura County (Oxnard, Thousand Oaks, Ventura), and Western Riverside County (Riverside, Corona, Temecula).

Quick answers

• Do mini-splits qualify? Yes, if they meet program criteria (ENERGY STAR/CEE) and have an AHRI-certified match.
• New construction? The 25C credit is generally for existing homes. Builder incentives like 45L are separate.
• Documentation needed? Itemized invoice, AHRI certificate, manufacturer certification, closed permits, and sometimes HERS reports.
• How long do programs last? Federal credits currently run through 2032; utility rebates can open/close based on funding.

Bottom line

High-efficiency AC can qualify for a federal tax credit (up to $600 for central AC) and additional state/utility rebates in Southern California. Heat pumps often unlock larger incentives. Verify eligibility using AHRI certificates, follow local permitting rules, and use licensed professionals—both for safety and because many programs, warranties, and insurers require it. Incentives change frequently, so always check current program details and consult a tax professional for personalized guidance.