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I am planning on installing a new WIFI thermostat (Honeywell RTH6580WF). I have a heat pump system (outdoor condenser unit and air handler in attic). Old thermostat did not have a 'c' wire, but it does have an extra wire in the bundle that I can use.
Do I need to connect the new 'c' wire on both units? Or will hooking the one to the air handler be enough?
You should connect the C wire, from whichever unit supplies the R wire. Typically it's the air handler, but since you've given no details it's impossible to say for sure.
