Central Air

• Central air conditioners stream cool air into a room by flowing air in and out of ducts. According to the Department of Energy, central air conditioners are more efficient than room air conditioning units. The Department of Energy estimates that current central air conditioners use 30 to 50 percent less energy than those built decades ago. To promote their use, the government passed tax credits in the 2009 American Recovery and Reinvestment Act to encourage individuals to become more energy efficient.
  
  

American Recovery and Reinvestment Act

• The American Recovery and Reinvestment Act created an energy efficiency tax credit for the tax years 2009 and 2010. This credit expired December 31, 2010. Taxpayers were eligible to deduct up to $1,500 as long as this amount was at least 30 percent of the total cost to install various home efficiency items such as central air. The $1,500 tax credit to individuals was substantial, and helped them lower their energy costs by installing more energy efficient items. A second benefit was that it provided additional revenue to manufacturers of energy efficient products.
  
  

Current Energy Tax Credit

• In 2011, President Obama signed a tax deal that significantly reduced the energy tax credit. Starting January 1, 2011, taxpayers only receive a 10 percent tax credit with a maximum of $500 for the purchase of energy efficient items such as central air. If the taxpayer used the tax credit in 2009 or 2010, it cannot be used in 2011. The benefit to individuals is minimal, especially when factoring in the cost of purchasing a new central air system.
  
  

Business Credits

• Businesses can receive tax credits for using energy efficient products such as central air. Instead of claiming tax credits, business owners can also apply for a renewable energy grant for property placed in service in 2009 or 2010. These grants can also be claimed for construction that began in 2009 or 2010 but does not get placed in service until 2016. These grants can be up to 30 percent of the investment in the facility for the new energy efficient products, including central air.