The Inflation Reduction Act was signed in 2022 and part of its aim is to increase the utilization of electric heat. This is a ten-year program that runs through 2032. The government has set an annual budget cap on the program. Tax credits are available for certain types of heating and air conditioning systems installed between January 1, 2023 and December 31, 2034. This is subject to change at any time by the government.
Federal Tax Credits
Heat Pumps
- Up to 30% of the project cost, up to $2,000
- For ducted systems the EER must be 10 or greater
- For mini split systems the SEER rating must be greater than 16
- All equipment must be ENERGY STAR certified
Air Conditioners
- Up to 30% of the project cost up to $600
- The air conditioner must be ENERGY STAR certified equipment with a minimum SEER rating of 16
Furnaces
- Up to 30% of the project cost up to $600
- ENERGY STAR certified gas furnaces with AFUE of at least 97% are eligible
How Do I Apply for Tax Credits on my HVAC?
In order to claim any tax credit on your heating and cooling system you must file the appropriate form with your tax return. Be sure to keep a copy of your installation records that show the date of installation and manufacturer information. In the past Form 5695 has been the appropriate form to fill out. However, tax credits are administered by the IRS, and the credit amounts you may receive are subject to IRS regulations. Therefore, we highly recommend consulting a tax professional for advice on tax preparation and your tax credit eligibility. For more information about the tax credit, visit IRS.gov.
Is there a Limit to How Many Tax Credits I Can Get?
Yes, in addition to the limits set for each individual piece of equipment, there is an overall limit of what you can claim per year. The overall total limit for an efficiency tax credit in one year is $3,200. Also keep in mind that credits only apply to existing homes (not new construction) and you must own the home and utilize it as your principal residence.
Other Tax Credits for Home Improvement
Heat Pump Water Heaters
30% of project cost up to $2,000
Inflation Reduction Act Rebates
Income-based rebates for heat pumps are covered in the Inflation Reduction Act. The literature states that, depending upon your income and the average income in your area, your heat pump may be free up to $8,000. Further information on this program has not yet been released.
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DISLCAIMER: The tax credit information contained within this website is provided for informational purposes only and is not intended to substitute for expert advice from a professional tax/financial planner or the Internal Revenue Service (IRS). Quality Comfort Home Services does not guarantee the accuracy of the information provided. For the most updated information on the federal tax credits, visit energystar.gov
*NOTE FROM ENERGY STAR: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.”
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