2026 Index Active
IRS Sec 25C Updated
US CostIndex US Index
Technical Whitepaper

Data Methodology & Engineering Models

An open review of the public datasets, mathematical equations, and regional weighting factors used in US Cost Index simulation engines.

1. Labor Cost Derivation: U.S. BLS OEWS Survey

Contractor quotes consist of two components: raw equipment and skilled labor. To avoid arbitrary labor markups, our engine models labor pricing using the U.S. Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics (OEWS) dataset for SOC Code 49-9021 (Heating, Air Conditioning, and Refrigeration Mechanics and Installers).

Effective Crew Billing Rate = (BLS Mean Hourly Wage × Overhead Multiplier × 1.5 Helpers)
// Overhead Multiplier (2.2×) accounts for general liability insurance, workman's comp, fleet maintenance, and EPA Section 608 compliance.

For example, in California where the BLS mean wage for certified technicians exceeds $38/hr, the modeled contractor billing rate is approximately $155/hr. In Alabama or Arkansas where the mean wage is ~$24/hr, the modeled billing rate is ~$85–$90/hr.

2. Equipment Sizing: DOE Building America Climate Zones

HVAC equipment sizing (tonnage) is calculated using the U.S. Department of Energy (DOE) Building America Climate Map (Zones 1 through 7) and ACCA Manual J load approximations:

  • Zones 1 & 2 (Hot-Humid / Hot-Dry): High cooling load. Baseline sizing factor: 450 sq ft / ton (26.6 BTU/sq ft).
  • Zones 3 & 4 (Mixed-Humid / Marine): Balanced load. Baseline sizing factor: 550 sq ft / ton (21.8 BTU/sq ft).
  • Zones 5, 6 & 7 (Cold / Very Cold / Subarctic): Heating dominant load. Baseline sizing factor: 650 sq ft / ton for cooling, paired with high-AFUE furnace or cold-climate inverter heat pump sized at 35–45 BTU/sq ft.

3. Operating Cost & Savings: U.S. EIA Electric Power Monthly

Energy savings are calculated against a baseline 10-SEER legacy system using state-specific average retail electricity prices from U.S. Energy Information Administration (EIA) Form 861M (Table 5.6.A):

Annual kWh = (Cooling BTU × Cooling Degree Days × 0.8) / (SEER2 × 1,000)
Annual Cost ($) = Annual kWh × (State EIA Electricity Rate in ¢/kWh / 100)

4. 2026 Inflation Reduction Act (IRA Section 25C) Rules

Tax deductions are modeled strictly against IRS Notice 2023-59:

  • Heat Pumps & Dual-Fuel Systems meeting CEE Tier 1 or North/South specifications: 30% of total installed cost, capped at $2,000.
  • Central Air Conditioning meeting CEE Advanced Tier: 30% of total installed cost, capped at $600.
  • Home Electric Panel Upgrades installed in conjunction with heat pump: Up to $600 additional credit.