Tax Credit Definitions

Information updated 12/30/2022

Please note, not all ENERGY STAR certified products qualify for a tax credit.

ENERGY STAR distinguishes energy efficient products which, although they may cost more to purchase than standard models, will pay you back in lower energy bills within a reasonable amount of time, without a tax credit.

AFUE (Annual Fuel Utilization Efficiency)
is a rating that denotes the efficiency of gas heating equipment. It is the amount of heating your equipment delivers for every dollar spent on fuel. A higher rating indicates more efficient equipment.

COP (Coefficient Of Performance)
of a heat pump is the ratio of the change in heat at the "output" (the heat reservoir of interest) to the supplied work.

EER (Energy Efficiency Ratio)
The higher the EER rating, the more energy efficient the equipment is. This can result in lower energy costs. This DOE site can show how to calculate potential energy cost savings of a more efficient unit.

Energy Factor
is the measure of overall efficiency for a variety of appliances. For water heaters, the energy factor is based on three factors: 1) the recovery efficiency, or how efficiently the heat from the energy source is transferred to the water; 2) stand-by losses, or the percentage of heat lost per hour from the stored water compared to the content of the water: and 3) cycling losses. For dishwashers, the energy factor is defined as the number of cycles per kWh of input power. For clothes washers, the energy factor is defined as the cubic foot capacity per kWh of input power per cycle. For clothes dryers, the energy factor is defined as the number of pounds of clothes dried per kWh of power consumed.

HSPF (Heating Seasonal Performance Factor)
rates the efficient operation of the heating portion of the heat pump. As the HSPF increases, the unit functions at a more efficient level. New units in the US have HSPF ratings from 7.0 to 9.4.

IECC 2009
Standards published by the International Code Council, the IECC sets forth compliance methods for energy-efficient construction of both residential and nonresidential construction.

Manufacturer’s Certification Statement
is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. The IRS encourages manufacturers to provide these Certifications on their website to facilitate identification of qualified products. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

SEER (Seasonal Energy Efficiency Ratio)
The higher the SEER rating, the more energy efficient the equipment is. A higher SEER can result in lower energy costs.

SHGC (Solar Heat Gain Coefficient)
measures how well a window blocks heat from sunlight. The lower the SHGC, the lower the heat gain through a window. SHGC ranges from 0 to 1.

Split System & Package System
A central air conditioner (or heat pump) is either a split-system unit or a packaged unit. The majority of consumers have split systems in their homes.

A split-system central air conditioner has 3 components:

  • an outdoor metal cabinet that contains the condenser and compressor
  • an indoor cabinet that contains the evaporator coil
  • an air handler, that in most cases is part of the furnace or heat pump, that sends the cool air through the duct system

If your home already has a furnace but no air conditioner, a split-system is the most economical central air conditioner to install.

A packaged central air conditioner has the evaporator coil, condenser, and compressor all located in one cabinet, which usually is placed on a roof or on a concrete slab next to the house's foundation. This type of air conditioner also is used in small commercial buildings. Air supply and return ducts come from indoors through the home's exterior wall or roof to connect with the packaged air conditioner, which is usually located outdoors. Packaged air conditioners often include electric heating coils or a natural gas furnace. This combination of air conditioner and central heater eliminates the need for a separate furnace indoors.

Thermal Efficiency
For energy-conversion heating devices their peak steady-state "thermal efficiency" is often stated, e.g., 'this furnace is 90% efficient', but a more detailed measure of seasonal energy effectiveness is the Annual Fuel Utilization Efficiency (AFUE).

measures how well a window, door, or skylight prevents heat from escaping. It is similar to the R value for insulation. The lower the number, the more efficient the window. Ratings usually range from 0.20 to 1.20.

Uniform Energy Factor (UEF)
The newest measure of water heater overall efficiency. The higher the UEF value is, the more efficient the water heater. UEF is determined by the Department of Energy’s test method outlined in 10 CFR Part 430, Subpart B, Appendix E.

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