HVAC and The Inflation Reduction Act

If you’ve been considering an HVAC upgrade and are looking at heat pumps, we’ve got great news. The Inflation Reduction Act (IRA) offers significant tax credits and rebates that can help you make upgrades to lower your carbon footprint and make your home more energy-efficient.

The Energy-Efficient Home Improvement Credit (also known as the 25C Federal Tax Credit) took effect on January 1, 2023, and covers:

• Up to 30% or $1,200 annually for qualifying equipment
• A $2,000 annual limit for heat pumps

By replacing old, outdated, and inefficient heating and cooling systems and equipment, homeowners in Chicago, IL and surrounding area can reduce the energy they’re using and save money in the long run. And now the IRA (Inflation Reduction Act) makes it more affordable!

HVAC Tax Credits Homeowners Can Claim

The Inflation Reduction Act extends and expands the existing Energy Efficient Home Improvement Credit (Section 25C) and the Residential Clean Energy Credit (Section 25D) to homeowners.

Projects installed between January 1, 2023, and 2032 quality for a 30 percent tax credit:

If you installed a heat pump in 2022, it is eligible for the old 25C tax credit, or 10 percent of costs up to $300.

Here is a closer look at HVAC products and eligibility requirements:

• All ducted air-source heat pumps with the ENERGY STAR® label qualify.
• Split air conditioner systems must have a Seasonal Energy Efficiency Rating (SEER2) of 16 or more. All packaged systems with ENERGY STAR certification are eligible.
• Gas furnaces must have an annual fuel utilization efficiency (AFUE) rating of at least 97 percent.
• Gas boilers with an AFUE of at least 95 percent qualify.
• Oil-fueled boilers and furnaces must be capable of using fuel blends.

HVAC Inflation Reduction Act Rebates

The Inflation Reduction Act set aside a $4.3 billion budget, with the money allocated to individual states for disbursement. Funding will vary from state to state, and eligibility is income-based.

For example, the High-Efficiency Electric Home Rebate Act covers 100 percent of electrification project costs (up to $14,000) for low-income households and 50 percent of costs (up to $14,000) for moderate-income households.

How Do Inflation Reduction Act Tax Credits and Rebates Work?

If you do have a new heater or air conditioner installed, you will need to pay the full price upfront. Keep the receipt. Then, when you file your taxes, you can enter the purchase price and other basic information about the HVAC replacement. You’ll receive the tax credits you’re eligible for as a part of your tax refund.

Note that tax credits are a flat amount refunded from your total taxes. So, if you qualify for a $5,000 tax credit, the government will take $5,000 off your total tax bill for the year.

How Do You Schedule an HVAC Replacement?

If you’re interested in scheduling HVAC system replacement, contact us at (224) 258-0510 or fill the form and schedule a quote. We can recommend the systems that qualify for the credits and help you choose between them.