Hydrogen bonding in clusters and extended layers of squaric acid molecules has been investigated by density functional computations. Equilibrium geometries, harmonic vibrational frequencies, and energy barriers for proton transfer along hydrogen bonds have been determined using the Car-Parrinello method. The results provide crucial parameters for a first principles modeling of the potential energy surface, and highlight the role of collective modes in the low-energy proton dynamics. The importance of quantum effects in condensed squaric acid systems has been investigated, and shown to be negligible for the lowest-energy collective proton modes. This information provides a quantitative basis for improved atomistic models of the order-disorder and displacive transitions undergone by squaric acid crystals as a function of temperature and pressure.