To combat increasing energy expenses and embrace sustainability, many homeowners are trying new methods to maintain comfort levels while using less energy. As part of the Inflation Reduction Act, federal tax credits are available for upgrading to more efficient HVAC systems, such as air conditioners. These credits offer big savings, provided that homeowners use qualifying equipment and submit the appropriate form.
If you’re worried about a long, complicated process, we can share something that will help! Air Alliance Team hopes this guide will provide all the information necessary to take full advantage of HVAC tax credits this year. Here’s what you should know.
Understanding the HVAC Tax Credits
These valuable tax credits for boosting your home’s energy efficiency are just one portion of the recent Inflation Reduction Act. With the higher cost of energy making an impact, helping more homeowners upgrade their equipment is always beneficial. The key provision of these credits is to reduce the cost of installing high efficiency upgrades. Two of note are the Energy Efficiency Home Improvement Credit and the Residential Clean Energy Credit.
But keep in mind, to apply for the credits, you’ll have to complete IRS Form 5695. Additionally, this form needs to be submitted within the same tax year your upgrades were installed, not bought.
Energy Efficiency Home Improvement Credit
Through 2032, the Energy Efficiency Home Improvement credit empowers homeowners by offsetting up to $3,200 each year for energy-efficient home upgrades. This can be up to 30% of the total project’s cost. Keep in mind that in order to be eligible for the maximum amount, it involves making different investments. For example, you’ll get up to $2,000 for a new, high-efficiency heat pump. This can be combined with the remaining $1,200 in credits for other eligible upgrades made within the tax year.
While new heat pump installation projects are a popular option for the tax credit, other HVAC upgrades like efficient furnaces and air conditioners also qualify. You’ll need to confirm the make and model’s energy efficiency rating is high enough for eligibility.
Exploring the Residential Clean Energy Credit
The Residential Clean Energy Credit amounts to roughly 30% savings on a wide range of residential clean energy efficiency projects. Eligibility only applies to homeowners looking for new clean energy solutions for their home. While the Home Improvement Credit works primarily with utilities and HVAC systems, this credit is more about renewable energy sources like solar and wind energy.
Some key details of this tax credit include the requirement that installation must occur between 2022 and 2032. But at the same time, homeowners can use any excess credit to reduce taxes in future years. This is a great way to soften the entry into investing in clean energy.
What Else Is Eligible for These Tax Credits?
Because HVAC systems are one of the biggest expenses on your energy bill, these tax credits incentivize the most energy-efficient options. But home energy efficiency can be improved in lots of other ways. Apart from the previously listed HVAC upgrades, {you could also choose|other eligible items include|you also have access to:
- Heat pump water heaters
- Electrical panel upgrades
- New electrical wiring
- Enhancements to insulation, air sealing, and ventilation
- High-efficiency electric stoves, cooktops, ranges or ovens
- Efficient heat pump clothes drying solutions
- Water boilers
Just like with installing one or more HVAC systems, you’ll need to confirm that your chosen products meet the eligible energy efficiency ratings.
Three Tips for Making the Most of 2024 HVAC Tax Credits
While any of these upgrades can improve your home’s energy efficiency, some planning ahead will ensure the best chance at more long-term benefits. Get the most from your HVAC tax credits with these reminders:
- Perform an energy audit to pinpoint valuable enhancements. Trust experienced HVAC companies to pinpoint essential products and services.
- Enhance your home's envelope by addressing inefficient windows and doors.
- Explore potential rebates from utility companies for clean energy upgrades. Renewable sources like solar, wind, and geothermal contribute to community power grid sustainability.
- Remember to consider financing plans offered by service providers.
Secure Your 2024 HVAC Credits with Help from Air Alliance Team
Partner with local HVAC professionals like Air Alliance Team for help with home energy audits and new installation projects. Our experienced installers will deliver everything you need for a more energy-efficient home.