Energy Efficient Tax Credit – Section 45L Key Criteria – Review of Heating/Cooling Systems

One of the important factors and data points in meeting the Section 45L energy tax credit criteria is heating and cooling, so this week we look at some of the terminology and factors that may get you as the developer a $2,000 per unit tax credit under the 45L energy tax credit.

Heating Definitions:

AFUE (Annual Fuel Utilization Efficiency) is a rating that reviews the efficiency of gas heating equipment. It is the amount of heating your equipment delivers for every dollar spent on fuel. A higher rating is better. For example, properties that commonly qualify for the energy tax credit under 45L show at least a 90 or higher rating on efficiency of gas heating units (which we find are pretty common in the Mid-West and elsewhere). It may be common to hear specs like ‘this furnace is 90% efficient’ but the more accurate measurement of seasonal energy efficiency (and the one used in our 45L software) is the annual fuel utilization efficiency or AFUE. Note, heat pump systems utilize a SEER rating system (see discussion below).

Cooling Systems:

The SEER rating is the key factor here for cooling systems and the Section 45L energy credit software. The SEER rating of a unit is the cooling output during a typical cooling-season divided by the total electric energy input during the same period. The higher the unit’s SEER rating, the better for meeting the energy tax credit criteria. Typically we like to see SEER ratings of at least 13 (which is minimum code in many states) or again the higher the better. ┬áThere is no allowance for different climates in this rating, which is intended to give an indication of how the EER is affected by a range of outside temperatures over the course of a cooling season. However, overall in our 45L tax credit software, there is a factor for climate zone which we will cover in a later blog.

Overall, our energy tax credit software combines together the heating and cooling overall BTU loads and creates a weighted score, although many more data points and factors go into the overall calculation to determine whether the developer gets the energy efficient tax credit under 45L.

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