You can save money by minimizing energy costs by purchasing a new, high-efficiency HVAC system. It may also make you eligible for rebates on your investment. Depending on your state and income, you could qualify for rebate programs implemented through local utility companies or state energy offices. You must submit a manufacturer certificate as part of your tax return to claim these credits.
Federal Tax Credits
Currently, federal tax credits are available for many types of HVAC systems. The on-again, off-again federal incentive for greater HVAC efficiency is back on as part of the Inflation Reduction Act passed by Congress and is expected to be signed into law on August 16. This bill includes a renewal and update of the previous Nonbusiness Energy Property Credit, which offers tax credits of up to $3,200 per year for eligible equipment that helps save energy in homes and businesses. Homeowners who purchase heat pump equipment that satisfies the minimum efficiency standards established by the Consortium for Energy Efficiency (CEE) may be eligible for a credit of up to $2,000 under this new legislation. The credits will be available to existing homeowners who install new equipment between January 1, 2023, and December 31, 2032.
To claim the credit, you will need proof that your system meets the requirements for the credit, such as an AHRI certificate or manufacturer certification. You must also file Form 5695 as part of your yearly federal return. You can find out if you qualify for the rebates on new HVAC systems by checking with your local power provider to see what rebate programs are available in your area. Then, talk to your HVAC service professional about the specifics of claiming the credit and how to prepare for filing.
State Tax Credits
In addition to federal tax credits, state and local rebate programs are available to encourage energy-efficient upgrades. These can include various items, from heat pumps to air conditioners and furnaces. The Inflation Reduction Act of 2022 includes increased incentives for homeowners who upgrade to high-efficiency electric and gas heating systems and water heaters. These incentives are designed to help offset the cost of these new, more efficient units and make them more accessible to all Americans. The new law differs from other tax incentives in that the government has set aside a certain amount of funds to be distributed to each state based on population. Then, each state is responsible for overseeing the program and providing the funds to eligible homeowners. For most people, a new heat pump or air conditioning system can be purchased and installed cheaply. However, there are some limitations. The new unit must be installed in your primary residence by December 31, 2023, to be eligible for the tax credit.
You may be eligible for a federal tax credit to purchase a new electric heat pump HVAC system or water heater. Depending on your selected system, you can reduce your installation expenses and energy costs by thousands of dollars. The tax credits for high-efficiency systems were expanded in 2023, and you can receive them for your purchase of new air conditioners, furnaces, and other equipment, as well as for home energy improvements such as insulation. It is an excellent incentive to make greener upgrades to your home and helps reduce the environmental impact of our country’s energy consumption.
You can apply for the credit based on the equipment’s SEER, EER, or AFUE rating for efficiency. The higher the ratings, the more efficient your system. HVAC experts can explain these ratings and provide you with the information you need to determine what your plan is rated to qualify for the rebates available. Some carry many ENERGY STAR-certified systems that qualify for the federal HVAC rebate. Be sure to speak with one of the qualified technicians to learn the best solution for your home or business.
A new HVAC system is a major purchase. As such, the investment will significantly impact your tax liability for the year of purchase. If you are considering purchasing a new HVAC system, it is important to understand that you may be eligible for a federal tax credit and an instant rebate. These incentives are provided as part of the Inflation Reduction Act and are intended to help offset the costs of upgrading to a more energy-efficient AC unit or heat pump. The federal ENERGY STAR home improvement credit (25C) is available for homeowners who install qualified high-efficiency heating and cooling equipment in their primary residences. The credit is available for central and ductless systems and applies to various equipment types. It also applies to hybrid heat systems that use a combination of a furnace and an air handler or all-electric heat pumps. If you are considering a new high-efficiency heat pump, check the manufacturer certifications listed below to see what qualifying products are available in your area. Be sure to consult with a tax professional to ensure you are ready for the maximum benefits of this incentive. You must file IRS form 5695 as part of your yearly tax return.