2022 Inflation Reduction Act Summary

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.

Federal Tax Incentives Retroactively Available for 2022

The Energy Efficiency Home Improvement Credit (formerly the Nonbusiness Energy Property Credit) is a Federal Tax Credit available to consumers for the 2022 Tax Year. The measures are as follows:

There is a lifetime limit of $500 for the credit (e.g., credits taken in previous years count towards the limit).
There are individual credit limits for air circulating fans ($50); some furnaces and boilers ($150); and certain water heaters, heat pumps, and air conditioning systems ($300). These items must meet energy efficiency requirements.

Click here to view qualifying equipment and credit amounts.

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 will go into effect January 1, 2023:

Buyers can claim up to $600 per purchase for up to $1,200 a year ($500 lifetime limit still in effect through 2022)
New limits for qualifying improvements:
- $150 for home energy audits;
- $250 for an exterior door ($500 total for all exterior doors);
- $600 for central air conditioners; natural gas, propane, or oil water heaters; natural gas, propane, or oil furnaces or hot water boilers; and
- $2,000 for electric or natural gas heat pump water heaters, electric or natural gas heat pumps, and boilers (for this one category, the $1,200 annual limit may be exceeded).

Residential Clean Energy Credit

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 Program 2023 (HEEHR)

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 rebates are available through 2032:

$1,600 for insulation, air sealing, and ventilation
$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. Note: It’s expected to take between 12 and 24 months for this funding to be available through your state.

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 (11/21/22 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 tiers here.

Resources:

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