HVAC Tax Credits

On August 16, 2022 the US Government signed into law the Inflation Reduction Act in an effort to reduce greenhouse gas emissions by 40% by 2030. As part of the Inflation Reduction Act, homeowners have access to cost-saving options for purchasing energy efficient and electric appliances or making home improvements to electrify their home or increase its energy efficiency.

The Energy Efficient Home Improvement Tax Credit provides a federal tax credit to homeowners who install high-efficiency equipment. The previous Nonbusiness Energy Property credit of up to $500 was extended through 2022. The amended Energy Efficient Home Improvement Credit, which begins in 2023 and extends through 2032, increases the tax credits as high as $600 for qualified air conditioner or gas furnace, and up to $2,000 for qualified heat pump, heat pump water heater or boiler.

The High Efficiency Electric Home Rebate Program will enable states to provide up to $14,000 in direct rebates to low and moderate-income households for installing qualified heat pumps, electrical panel and wiring upgrades, and home insulation and sealing. This program will be administered by individual states, so the effective dates and funds available will vary by state.

Foster’s Sales Consultants are happy to discuss how you might take advantage of this credit and which HVAC systems apply.

We encourage you to consult with your tax professional to confirm eligibility before making a final purchase decision. Call our team today with any questions!

Two ways for homeowners to save

Energy Efficient Home Improvement Tax Credit (25C) Program

The amended Energy Efficient Home Improvement Credit (25C) begins in 2023 and extends through 2032. It increases the tax credit limits for high-efficiency equipment as follows:

  1. Eligible equipment includes:

    • Heat pumps and heat pump water heaters

    • Energy-efficient HVAC systems (including furnaces, boilers, and central AC)

  2. The 25C credit has an annual cap of $1,200 (except heat pump):

    • Up to $600 each for a qualified air conditioner or gas furnace, with an annual cap of $1,200

    • Up to $2,000 with a qualified heat pump, heat pump water heater, or boiler

There are no income requirements for this tax credit, and it cannot be combined with other federal programs.

High-Efficiency Electric Home Rebate Program

The U.S. government appropriated $4.5B of funds for the High-Efficiency Electric Home Rebate Program (HEEHRP) and will distribute the funds to state energy offices to administer the rebate program as follows:

  1. HEEHRP provides HVAC rebates up to $14,000 per household, including:

    • Up to $8,000 for installing Energy Star® qualified heat pumps

    • Up to $4,000 for electrical panel upgrades

    • Up to $1,600 for home insulation and sealing

    • Up to $2,500 for home electrical wiring improvements

  2. Eligibility and the amount of the rebate depends on household income:

    • For households below 80% of area median income, 100% of the system purchase price qualifies for the rebate.

    • For households that fall within 80% to 150% of area median income, 50% of the system purchase price qualifies for the rebate.

    • Households above 150% of area median income do not qualify for the HEEHRP rebate.

The duration of the program will depend on the funds available within each state and the number of rebates distributed.