What does the Inflation Reduction Act mean for you?
As of August 12, 2022 the Inflation Reduction Act has been signed into law. For the HVAC industry, this means tax credits and rebates for many of the products we offer. Below is a summary to help you navigate the incentives available this year and beyond.
Energy Efficiency Home Improvement Credit 2023 (25C)
This tax credit allows homeowners to deduct up to 30% of the cost of upgrades to their homes from their taxes. The following measures went into effect January 1, 2023:
| Equipment Type | Tax Credit Available for 2022 | Tax Credit Available for 2023-2032 Tax Years |
|---|---|---|
| Heat Pumps | $300 | 30% of cost, up to $2,000 per year |
| Air Conditioners | $300 | 30% of cost, up to $600 (max $1,200 per year) |
| Furnaces | $300 | 30% of cost, up to $600 (max $1,200 per year) |
| Boilers | $300 | 30% of cost, up to $600 (max $1,200 per year) |
| Water Heaters | $150 | 30% of cost, up to $600 (max $1,200 per year) |
| Home Energy Audits | N/A | 30% of cost, up to $150 (max $1,200 per year) |
Visit our Federal Rebates page for specific product eligibility.
Clean Energy Credits
Contractors can leverage IRA Tax Credits up to 50% for the installation of geothermal systems for commercial building owners and 30% for homeowners.
The Residential Clean Energy Credit, which is now extended through 2034, was previously called the Residential Energy Efficient Property Credit. The credit amount for installing clean household energy such as solar, wind, or geothermal has been raised from 26% to 30% from 2022 to 2032. It then falls to 26% for 2033 and 22% for 2034.
High-Efficiency Electric Home Rebate Act of 2023 (HEEHRA)
This rebate (not a tax credit) is available to low-and-middle income families whose total annual income is less than 150% of the median income where they live as calculated by the Department of Housing and Urban Development. The following HVAC rebates are available through 2032:
- $1,750 for a heat pump water heater
- $8,000 for a heat pump for space heating or cooling
There are limits on the amounts consumers can qualify for. Learn more about these rebates here.
Homeowner Resources:
The White House has introduced a new website – www.cleanenergy.gov. This interactive resource details how you can take advantage of the Inflation Reduction Act (IRA) by using their online tools and answering a few questions. The site also directs users to additional resources like the EPA Home Upgrade program and DOE Energy Saver website.
Please note, eligibility rules and cash rebate values for these programs will be defined by your state. To calculate your potential savings, check out this rebate calculator from Rewiring America.
CEE Releases Energy Efficiency Tiers Used for 25C Tax Credit (October 2023 Update)
The Consortium for Energy Efficiency has released their 2023 efficiency tiers recently chosen by Congress as the qualification for Section 25C tax credits for installing energy-efficient residential cooling equipment. The new 25C requirements demand that equipment meets the highest tier that is not the advanced tier. For central split system AC this is CEE Tier 2, for split-system ducted heat pumps this is CEE Tier 1, non-ducted is Tier 2. For heat pumps CEE does have a North and South region, the North region is the same as the north DOE region and the CEE South region is the same as the combined DOE southeast and southwest regions.
View the full list of CEE tiers.
Resources:
- Inflation Reduction Act Contractor’s Webpage (Amana/Goodman/Daikin)
- Inflation Reduction Act Brochure – What it Means for HVAC Professionals
- Residential Geothermal Tax Guide 2023
- Commercial Geothermal Tax Guide 2023
Sources:
HVAC Tax Incentives Enhanced In Sweeping Bill – ACHR News
Key programs in the Inflation Reduction Act and what they mean for Americans – Rewiring America
Here’s how the new US tax credits and rebates will work for clean energy home upgrades – Electrek
The Inflation Reduction Act – An Overview for EAP Members – Electrical Association of Philadelphia
Note: This information does not and should not be considered tax advice. All information is for general purposes only. Contact your tax professional for specific, applicable details. Criteria not static and will change if CEE amends criteria.