To avoid rising energy costs and work toward a more sustainable life, many homeowners are looking for ways to enjoy the same standards of comfort while reducing utility bills. With help from the Inflation Reduction Act, federal tax credits are available for upgrading to more efficient HVAC systems, such as air conditioners. These credits offer a big chunk of the installation costs, provided that homeowners work with qualifying equipment and submit the right paperwork.
If you’re trying to avoid a long process, we can share something that will help! Watts Electric & AC hopes this guide will provide all the information necessary to take full advantage of HVAC tax credits this year. Here’s how to make it happen.
Understanding the HVAC Tax Credits
These valuable tax credits for upgrading your home to be more energy-efficient are just one small part of the recent Inflation Reduction Act. Energy costs affect everyone, so helping homeowners upgrade to higher efficiency utilities can benefit everyone. The key provision of these credits is to help pay for high efficiency HVAC equipment and other projects. The two we’ll cover are the Residential Clean Energy Credit and the Energy Efficiency Home Improvement Credit.
But keep in mind, to claim your credits, you’ll have to complete IRS Form 5695. Additionally, this form has to be submitted during the same tax year the upgrades were installed, not purchased.
Maximizing Savings with the Energy Efficiency Home Improvement Credit
Through 2032, the Energy Efficiency Home Improvement credit empowers homeowners by offsetting up to $3,200 annually for energy-efficient home upgrades. This amounts to 30% of the total project’s cost. It's important to note in order to get back the maximum amount, you’ll have to make several investments. For example, you’ll receive up to $2,000 for high efficiency heat pump systems. This can be paired with an additional $1,200 in credits for more projects in the tax year.
While new heat pump systems are a key target for this incentive, high-efficiency furnaces, air conditioners, boilers, and other HVAC systems are still eligible for this tax credit. It will help to confirm the make and model’s energy efficiency rating is high enough for eligibility.
Residential Clean Energy Credit
The Residential Clean Energy Credit provides 30% savings on a number of other residential clean energy efficiency projects. Eligibility only applies to homeowners seeking to update existing or newly constructed homes. While the Home Improvement Credit works primarily with utilities and HVAC systems, this credit is instead designed around renewable energy sources like solar and wind energy.
Some provisions of the tax credit include requiring the installation project to be finished between 2022 and 2032. But at the same time, homeowners can keep the excess credit to reduce future taxes. This is a great way to spread out costs and keep them more manageable.
What Else Is Eligible for These Tax Credits?
Because HVAC systems are one of the major reasons for high energy bills, these tax credits can guide you to the most energy-efficient options. But home energy efficiency can be improved in many other ways. Apart from the previously listed HVAC upgrades, {you could also choose|other eligible items include|you also have access to:
- Energy-saving heat pump water heating systems
- Modern electrical panel improvements
- Upgraded electrical wiring
- Enhancements to insulation, air sealing, and ventilation
- Energy-efficient cooking appliances like stoves, cooktops, and ovens
- Heat pump clothes dryers
- Water boilers
Just like with installing one or more HVAC systems, you’ll need to verify that your preferred make and model features the required energy efficiency ratings.
Maximizing Your 2024 HVAC Tax Credits: Top 3 Tips
While any of these upgrades can boost home energy efficiency, some planning ahead will ensure they offer the most long-term benefits. Get the most from your HVAC tax credits with the following three tips:
- Perform an energy audit to pinpoint valuable enhancements. Rely on professional HVAC assessments for crucial advice.
- Improve your home's thermal efficiency with better 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 Watts Electric & AC
Partner with local HVAC professionals like Watts Electric & AC for help with home energy audits and new installation projects. Our helpful installers can deliver whatever you need for home energy efficiency upgrades.