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Incentive Details for the Inflation Reduction Act

Exciting news for homeowners!

Recent legislative changes bring potential savings and incentives for upgrading your HVAC system. Not only can you reduce energy costs, but you may also qualify for tax credits and rebates.

For Installations Before December 31st, 2022:

  • You may be eligible for tax credits ranging from $50 to $300, or up to 10% of installation costs (with a maximum of $500) under the former Internal Revenue Code 25C guidelines.

For Installations Between January 1, 2023, and December 31, 2032:

  • You could qualify for tax credits of up to 30% of installation costs, amounting to a maximum of $1,200 per year, under the expanded Energy-Efficient Home Improvement Tax Credit 25C program.

Additional 25C Tax Credit Changes:

  • Qualified heat pumps now have a separate yearly limit of up to $2,000.
  • Eligible air conditioners and furnaces may each qualify for up to $600

Note: When you include a qualifying heat pump in your purchase, the maximum 25C tax credit reaches $3,200.

The Inflation Reduction Act (IRA), signed in August 2022, allocates nearly $370 billion to incentivize residential energy-efficient purchases. Effective from January 1, 2023, the Internal Revenue Code Section 25C credit has been substantially enhanced, offering homeowners greater savings in addition to the energy bill reductions associated with energy-efficient HVAC systems.

Learn more about the Energy Efficient Home Improvement Tax Credit (25C) under the Inflation Reduction Act.

Please keep in mind that specific information regarding qualified systems and how to claim Home Improvement Tax Credits for 2023 and beyond is pending the release of application instructions from the IRS.

Local Energy Efficiency Rebate Programs: Your state or local municipality may offer additional rebate programs related to energy-efficient upgrades rebates available in your area.

Note: Rebate programs can vary from state to state and may differ based on income.

How to Apply for a Federal Energy Tax Credit: Subject to IRS regulations, tax credits are applied as a direct reduction of taxes owed. Follow these steps for applications related to equipment installed before December 31, 2022. The IRS is yet to define the process for 2023. Stay tuned for updates.

Step One: Download your system’s manufacturer’s certificate for your records.

Step Two: Consult a tax professional for other methods to take advantage of energy tax credits.

Step Three: Submit Form 5695 along with your tax returns to the IRS. Learn the proper submission process here.

Invest in your home’s energy efficiency and enjoy potential savings through these valuable incentives.

https://www.irs.gov/pub/irs-pdf/f5695.pdf