Allbritten Highlights How Property Owners Can Save On HVAC Systems With The 2023 HVAC Tax Credits

For those who are looking to replace or upgrade their HVAC system, they’re in luck as there are new tax credits available that can help them save quite a bit. These tax credits were created as part of the 2022 Inflation Reduction Act. They allow property owners to get up to a few thousand dollars back, when they purchase and install a new qualifying heat pump, air conditioner, furnace, or biomass boiler.

The tax credits also cover certain high-efficiency appliances or appliances that have received upgrades to improve their home’s energy efficiency. The Inflation Reduction Act also established a separate rebate program, which can help save up to US$ 8,000 when purchasing a new electric heat pump or make other home energy-efficiency improvements.

How the Energy Efficient Home Improvement Tax Credit Works

This program allows them to earn up to a US$ 3,200 tax credit each year

The Energy Efficient Home Improvement tax credit is available to anyone with a single-family home who has a qualifying HVAC unit installed any time between January 1, 2023, and December 31, 2032. This program allows them to earn up to a US$ 3,200 tax credit each year. They can claim this amount when they file their taxes the next year.

The program is split up into two parts. Property owners can earn up to US$ 600 or US$ 1,200 total credit for installing a high-efficiency furnace and air conditioner, if the new units meet certain criteria. This US$ 1,200 credit can also apply when they make some energy-efficiency improvements, such as upgrading their windows and doors, or having their home insulated.

Qualifying furnaces and air conditioners

Qualifying furnaces and air conditioners are each eligible for a tax credit of up to 30% of the total installation cost, but this credit is capped at a maximum of US$ 600 per unit. The cap for other home energy-efficiency improvements is US$ 1,200 or no more than 30% of the total cost of the work.

The second part of the program applies to new electric heat pumps, heat pump water heaters and biomass boilers, and the tax credit for these units can be worth up to US$ 2,000 a year. As with the other units, this credit is capped at 30% of the total purchase and installation cost for each new unit.

Criteria to apply for tax credit

When applying for the tax credit, the tax filing must include the invoice to prove how much they paid and to show that their new unit meets the specific energy-efficiency criteria. Only units that qualify for the Consortium for Energy Efficiency’s highest efficiency tier qualify for these tax credits.

For gas furnaces to qualify, they must have an AFUE (Annual Fuel Utilization Efficiency) of at least 97%

This means that the unit must be ENERGY STAR-rated and also meet specific requirements in terms of SEER2 (Seasonal Energy Efficiency Ratio), HSPF2 (Heating Seasonal Performance Factor) or AFUE (Annual Fuel Utilization Efficiency).

A new air conditioner is eligible if it is at least 17 SEER2, whereas heat pumps must be at least 18 SEER2 and 10 HSPF2. For gas furnaces to qualify, they must have an AFUE (Annual Fuel Utilization Efficiency) of at least 97%. However, these minimum ratings are only for the current year and will most likely increase in the next few years.

The Consortium for Energy Efficiency

The Consortium for Energy Efficiency updates the requirements for its various efficiency tiers each year. In addition, the tax code states that units only qualify for a tax credit if they meet the requirements for the highest efficiency tier that were established at the start of the current year.

In more basic terms, a unit that qualifies for the highest tier this year may not qualify in future years since the requirements for the highest tier can increase from year to year.

For this reason, it is recommended to not wait to have a new unit installed, if the current one is having lots of issues or nearing the end of its life. People will still be eligible for the tax credit if they replace their unit anytime in the next decade. Remember, though, that they may not save as much in future years, if the requirements increase and they need to buy an even more efficient unit to qualify.

How the high-efficiency Electric Home Rebate Program Works

The US federal government has a total of US$ 4.4 billion to fund the program

The High-Efficiency Electric Home Rebate program is slightly different as it is not a tax credit but a rebate paid out by the state government. The US federal government has a total of US$ 4.4 billion to fund the program, which is distributed to individual states based on population.

The states must then establish the program and distribute the money to families that qualify. The rebates available through this program can stack with the tax credits, which means they may be eligible to claim both.

Availability of tax rebates varies from state to state

As each state is responsible for its program, the specific timeline of when the rebates will be available varies. The rebates should be available in most states by the end of 2023, and states have to start distributing them by the end of August 2024, or else they will forfeit the money, and it will be distributed to other states.

Unlike the tax credits, these rebates are partially based on income level. All single-family households can qualify as long as they earn no more than 150% of the average annual income in their area.

However, only low- and middle-income families that earn under 80% of the average income will receive the full rebate. If your income is between 80% and 150% of the average, you will only be eligible for half the total amount.

New electric heat pump automatically eligible for a rebate

Any new electric heat pump is automatically eligible for a rebate of up to US$ 8,000 or US$ 4,000

Under this program, any new electric heat pump is automatically eligible for a rebate of up to US$ 8,000 or US$ 4,000, depending on the income level. Heat pump water heaters qualify for a rebate of up to US$ 1,750.

There are rebates for electrical and breaker panel upgrades, home weatherization, heat pump clothes dryers, and some electric stoves. In total, each single-family household can claim up to US$ 7,000 or US$ 14,000, depending on their income level.

One great aspect of this rebate program is that all electric heat pumps qualify for a rebate. This is because, unlike the tax credit program, the rebate program does not have any specific energy-efficiency requirements.

Retroactive 2022 HVAC Tax Credits

The Inflation Reduction Act also established a retroactive tax credit for people who had certain qualifying HVAC units installed at any time in 2022. Unfortunately, these retroactive tax credits aren’t nearly as much as the new credits.

Still, people may be eligible for a credit of either US$ 300 or US$ 500, depending on the type of unit they have installed and its energy-efficiency rating. However, they will need to apply for the credit when they file their taxes, as the retroactive credit expires at the end of this year.

Fresno’s HVAC and Plumbing Experts

For those in need to upgrade their home with a heat pump or need a new furnace, air conditioner or water heater, Allbritten is here to help. The company’s team can assist in choosing the right unit for the home and also help to ensure that whatever new unit home owners choose qualifies for the tax credit or rebate program.

In addition, Allbritten can perform a home energy audit to help find ways to improve the home’s energy efficiency, so they can save even more. For those in need of any plumbing, heating or cooling repairs or maintenance, the company can take care of that as well.