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I recently received a wifi enabled thermostat which I thought I could install easily since I saw an unused wire (Blue) which I assumed would be the C wire behind the current thermostat.

old

When I went to install it, I found out the blue wire isn't actually connected to anything but there is a red wire connected the C terminal which I believe runs out to the ac unit.

furnace wiring

Can I just connect the blue wire to the C terminal in addition to leaving the red wire or will this short something? Or does this just need to be completely rewired?

Thanks!

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You should be fine connecting the unused blue wire to the C terminal in the furnace/air handler.

You'll notice that on the Y terminal that there's a yellow wire from the thermostat, and a white wire that presumably goes to the outdoor unit. The red wire connected to the C terminal, simply completes the circuit through the outdoor units contactor coil.

The full circuit path for cooling would be as follows:

L1 of transformer secondary -> R terminal in furnace -> red wire -> R terminal on thermostat -> Y terminal on thermostat -> yellow wire -> Y terminal in furnace -> white wire -> contactor coil -> red wire -> C terminal in furnace -> L2 of transformer secondary.

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