TAKE ADVANTAGE OF FEDERAL HVAC TAX CREDITS

November 30, 2023

Anyone living in North and South Carolina knows having shelter from the elements is crucial all year. Whether you want to stay cool in the summer or warm in the winter, reliable indoor comfort is a must-have for homeowners.

Securing that indoor comfort can come with a hefty price tag. However, there are a few surprising ways to lessen that burden on your wallet with federal HVAC tax credits.

Does a new HVAC system qualify for a tax credit? Keep reading and we’ll tell you the answer, along with how you can save money while upgrading the comfort of your home.

WHAT IS THE INFLATION REDUCTION ACT?

The Inflation Reduction Act of 2022 (the “IRA”) is a law that provides federal tax credits for eligible homeowners who make energy-efficient home improvements. You don’t want to miss out on these savings. You may be able to claim specific upgrades on your tax filings—and possibly save up to $3,200.

HOW THE IRA WORKS HIGHLIGHTS

If you’re not familiar with the Inflation Reduction Act, Here is an overview:

The tax credits include qualifying energy-efficient HVAC systems, heat pump water heaters, geothermal heating installation, insulation improvements, and some high-efficiency water heaters.  
Homeowners can claim tax credits of 30% of the costs for the upgrades, up to $3,200 for making qualified energy-efficient home improvements.
The law empowers you to improve your energy use and save while helping boost energy efficiency.
Homeowners can take advantage of the credit every year to make upgrades, as it resets annually.

WHAT QUALIFIES AS ENERGY-EFFICIENT UPGRADES?

One of the IRA’s main points is to reduce greenhouse gas usage to improve the environment, which is why energy efficiency is the focus of all the available credits. Energy efficiency means using less energy to get a job done.

If you’re looking for energy-efficient upgrades both in general and for federal tax credits, here’s a list:

Exterior doors and windows
Skylights
Insulation materials
Central air conditioners
Water heaters
Furnaces
Boilers
Heat pumps
Biomass stoves

Call 704-620-6252 to schedule an appointment!

WHAT FEDERAL HVAC TAX CREDITS ARE AVAILABLE TO ME?

There are three main federal HVAC tax credits available through the IRA. Here’s how each federal energy tax credit works.

RESIDENTIAL CLEAN ENERGY CREDIT

The Residential Clean Energy Credit offers 30% of the costs of new clean energy additions to your home. This credit can be used each year you install the required additions until 2033. So, when you do taxes that year, you can put 30% of the installation costs toward whatever you owe in taxes.

You cannot turn this credit into cash, though.

If you have excess credit, you can hold onto it so you can apply it to next year’s taxes as well. You may have to subtract any rebates, subsidies, or other financial assistance from the installation total before taking 30% off.

Qualified Residential Clean Energy purchases include:

Solar electric panels
Solar water heaters
Wind turbines
Geothermal heat pumps
Fuel cells
Battery storage technology

Additionally, all the labor costs are included as a qualified cost.

Solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity, and geothermal heat pumps must meet Energy Star requirements.

ENERGY EFFICIENT HOME IMPROVEMENT CREDIT

If you make any energy-efficient home improvements after January 1st, 2023, you can be eligible for the Energy Efficient Home Improvement Credit. The credit equates to 30% of the cost of the improvement. You can claim this credit each year you add an improvement until 2033.

The following improvements are eligible, as long as they meet Energy Star requirements:

Exterior doors, windows, and skylights
Insulation materials
Central air conditioners
Water heaters
Furnaces
Boilers
Heat pumps
Biomass stoves and boilers
Home energy audits
Labor
Installation costs

Unlike the Residential Clean Energy Credit, you can not save this credit for future taxes if you have extra remaining. There are also limitations to the amount of credits you can collect. The maximum amount of money you can claim each year is:

$1,200 for energy-efficient property costs and certain energy-efficient home improvements. There are additional limitations for exterior improvements and home energy audits.
$2,000 per year for qualified heat pumps, water heaters, biomass stoves, or biomass boilers.

Again, you have to subtract subsidies, rebates, or other financial incentives from the total before determining 30% of the costs.

HIGH-EFFICIENCY ELECTRIC HOME REBATE ACT (HEEHRA)

This rebate is concentrated on low- to moderate-income households who want to use an electric heat pump but may not be able to afford the installation. The rebate can cover up to $8,000 for both the purchase and installation costs.

People with household incomes less than 150% of the area median income are eligible for HEEHRA. However, your system must meet Seasonal Energy Efficiency Ratio (SEER) and Heating Seasonal Performance Factor (HSPF) standards. The minimum SEER standard is at least 15 SEER2, and the minimum HSPF is 8.2 HSPF2.

In addition to the heat pump, this rebate also includes:

Up to $1,750 for a heat pump water heater
Up to $840 for a condensing electric dryer
Up to $840 for an electric range

HVAC Tax Credits in North Carolina and South Carolina

There are also two state-level HVAC tax credits that North Carolina and South Carolina homeowners can take advantage of: HOMES Efficiency Rebates and HEAR Electrification Rebates.

The HOMES Efficiency rebate offers $2,000–$4,000 rebates for home retrofits that make them more energy efficient. This can work for both single and multi-family homes. The amount you receive depends on how much energy is saved because of the changes.

The HEAR Electrification Rebates gives money back on the cost of electric and home appliance upgrades for low- to moderate-income households. There is a $14,000 rebate cap per household.

Both rebates will cover various home improvements like:

Electric heat pump clothes dryers
Electric heat pumps for space heating and cooling
Electric heat pump water heaters
Electric panel and wiring upgrades
Electric stoves, cooktops, ranges, and ovens
Air sealing
Duct sealing
Insulation
Materials to improve ventilation
Potentially other energy-saving technologies

HOMES and HEAR Rebates may already be available in both states.

HOW LONG DO YOU HAVE TO CLAIM UPGRADES ON YOUR TAXES?

You can claim the various credits for home additions and improvements through 2032. But don’t wait—schedule an appointment to improve your house’s HVAC system now!

And while you’re at it, sign up for our Pro Service Plan.

BROTHERS AIR, HEAT & PLUMBING IS HERE TO HELP!

We understand the IRA law and its associated HVAC tax credits can be confusing. For this reason, a great deal of misleading information is floating on the web. When you have questions, remember that the team at Brothers is just a phone call away.

Since you learned a new HVAC system qualifies for a tax credit, you might be considering replacing your current system. Our comfort advisors can help you understand which systems are eligible for tax credits under the new law. For example, if you want a new furnace, our team can help you so you can deduct your new furnace from your taxes. We will work with you to replace your system by the end of the year so you can benefit from a tax credit.

We also offer financing options to make upfront costs a little easier to meet.

Note: While we can provide information about what equipment is eligible, keep in mind that Brothers is not a licensed tax professional. We recommend consulting with a tax advisor for any in-depth tax credit queries.

UPGRADE NOW & SAVE AT TAX TIME

So, how has your home been treating you? Water heater giving you the cold shoulder? HVAC system cycling on and off? Then what are you waiting for? Now is the time to upgrade that outdated system to a more energy-efficient model.

At Brothers, we are committed to helping our customers experience true indoor comfort while assisting our community. This is why we highly suggest taking full advantage of the federal HVAC tax credit before the end of this year.

Call 704-620-6252 to get started!