Tax Breaks for Energy-Efficient Home Improvements
You might qualify for a tax credit if you install an eligible central air-conditioning system this year.

Can I get a tax credit for installing a new central air conditioner?
Maybe. Last year’s stimulus law expanded the tax credits for energy-efficient home improvements and extended the credit for 2009 and 2010. If you install an eligible central air-conditioning system in your principal residence before December 31, 2010, you could qualify for a tax credit worth 30% of the cost of the air-conditioning system and installation, up to a $1,500 maximum. Because it is a tax credit, it lowers your tax bill dollar for dollar.
Only certain central air-conditioning systems qualify for the credit, based on their energy efficiency. Many manufacturers provide a Manufacturer Certification Statement on their Web sites, certifying that the product qualifies for the tax credit. Your HVAC contractor may also be able to provide you with a copy. In some cases, you may need to replace both the heating and air-conditioning systems to get the credit. See the detailed explanation in the Federal Tax Credits for Consumer Energy Efficiency page at the government’s EnergyStar.gov Web site (the central air-conditioning requirements and FAQs are particularly helpful). Window-unit air conditioners are not eligible for the tax credit.

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To claim the credit, file Form 5695 with your 2010 tax return in the spring (the 2010 version of the form is not available yet, but here is a link to the 2009 form, as well as instructions and general information). You do not need to submit the Manufacturer Certification Statement of Eligibility with your tax return, but you should keep a copy with your records. The $1,500 maximum for the tax credit applies to 2009 and 2010 combined -- so if you took a credit for energy-efficient home improvements last year, you used up part of your allowance. A $1,000 credit claimed on your 2009 return, for example, means that your 2010 credit can’t exceed $500.
For more information about the tax breaks for energy-efficient home improvements, see Going Green Pays Off. For more information, see Energystar.gov.
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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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