On August 16, 2022 the U.S. Government signed into law the Inflation Reduction Act (IRA) in an effort to reduce greenhouse gas (GHG) emissions by 40% by 2030. The most meaningful impacts to HVAC are in two key areas.
- Energy Efficient Home Improvement Tax Credit (25C), and
- High Efficiency Electric Home Rebate Program
- What Does This Mean for Homeowners?
Through the IRA, homeowners will have access to cost-saving options when purchasing energy-efficient and electric appliances or making home improvements to electrify their home or increase its energy efficiency. Benefits include rebates for low and moderate-income households, and the contractor, for installing heat pumps. This also includes energy efficiency improvement tax credits for installing Consortium for Energy Efficiency (CEE), the highest efficiency tier HVAC equipment.
- High-Efficiency Electric Home Rebate Program (HEEHRP)
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.
- 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
- 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.
Energy Efficient Home Improvement Tax Credit (25C) Program
The renewed Energy Efficient Home Improvement Tax Credit (25C) program increases the HVAC tax credit limit for installing CEE Top Tier high-efficiency equipment, it is retroactive to January 1, 2022 and approved until 2032.
- Eligible equipment includes:
- Heat pumps and heat pump water heaters
- Energy-efficient HVAC systems (including furnaces, boilers, and central AC)
- 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
- 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.