Financial incentives could make air conditioners a hot buy

If you need new air conditioning, the higher-efficiency models you'll find in stores combined with some financial incentives might make this a good time to buy.

Before you shop, use the information below and check out our latest report on air conditioning, which includes coverage of split-ductless systems and portable air conditioners and updated reliability data for central air conditioning (report and ratings available to subscribers). And watch our video buying guide (below).

Window and Through-the-Wall Air Conditioners
Available incentives: The Database of State Incentives for Renewables & Efficiency lists 67 utilities in 20 different states that offer rebates on Energy Star-qualified air conditioners. Rebates vary from $15 to $150. They're generally more generous for higher-Btu machines and in the Sun Belt. Window air conditioners don't qualify for federal tax credits. Six states also offer sales tax holidays on Energy Star appliances. Watch for manufacturer rebates and store sales and don't be shy about haggling.

"We're not only trying to save the customer money but also hold down peak demand so we you don't have to build new power plants," says Ed Clark, director of communications for Austin, Texas-based Austin Energy. "Our average customer uses 46 percent of their annual electricity usage from June to September."

Why replace? If your air conditioner is more than nine years old, it might make sense to replace it. The latest Energy Star-qualified models use about 25 percent less power than ones made before late 2000. The U.S. Department of Energy estimates you'll save an average of $75 in energy costs over the appliance's lifetime. Use our free online calculator to determine how big an air conditioner you need.

Split-Ductless and Central-Air Systems
Available incentives: Some of the split ductless models we tested (like the one shown) have a seasonal energy-efficiency ratio (SEER) above 16, which qualifies them for a 30 percent a federal tax credit. Labor is included, but the credit is capped at $1,500.

Utilities in 26 states have rebate programs for split ductless and central-air systems with a SEER between 14 and 17. And 30 states also offer low-interest loans for a split-ductless or central-air system.

Why replace? New central-air-conditioning systems are 20 to 40 percent more efficient than those made a decade ago. Also, repairing an older systems can be expensive. However, if your system is in good condition, you'd be better off sealing leaks in the system and insulating any ductwork that passes through uncooled spaces. These improvements can save you up to 40 percent of your cooling bill.

If you're tired of the hassle of installing air conditioners but don't have room to run ducts, consider a split-ductless system. The units we recently tested provided excellent cooling performance and were much quieter than window-mounted air conditioners. Prices have also fallen in the last few years. We tested models ranging from $1,000 to $1,200 that could cool an average room. To cool multiple rooms, you'll need multiple evaporators (the fan and cooling coil unit mounted in each room). Each evaporator requires its own condensing unit outdoors, though some brands offer models that can connect to several evaporators. All this equipment can make the cost climb quickly so it typically makes the most sense to install a central system when cooling the entire home.—Gian Trotta | e-mail | Twitter | Forums | Facebook

Essential information: If your local utility rebate is taxable (you'll get a Form 1099 from the utility), then you can put in for the full cost of the air-conditioning system. If the rebate is not taxable, then you have to subtract the rebate amount from the total cost of the system before you figure out your federal tax credit.