If your HVAC system is near the end of its useful life or you’re just looking to upgrade it to save on your heating or cooling bills, now is a great time to install a replacement. There are currently incentives like tax credits that can allow you to save quite a bit of money on the installation. Here’s a quick rundown, courtesy of our AC and heating replacement team.
The Energy Efficient Home Improvement Credit
The Energy Efficient Home Improvement Credit was established as part of the Inflation Reduction Act of 2022. It allows homeowners to earn a federal income tax credit to help offset the cost of replacing their furnace, air conditioner, heat pump or ductless mini-split.
Furnaces and air conditioners are eligible for up to $600 credit, while central and ductless heat pumps are eligible for credit of up to $2,000. The credit is capped at 30% of the installation cost.
The same credit is also available for other energy efficiency improvements, such as replacing windows and exterior doors, air sealing and insulation. Most of these other improvements fall into the same category as new furnaces and ACs, which can be capped at $1,200 per year. Installing a heat pump water heater or a biomass boiler falls into the same category as heat pumps, and this category is capped at $2,000 per year.
Only ENERGY STAR-certified units that meet the minimum energy efficiency requirement are eligible for a tax credit. You can only use the credit to offset what you owe on your next year’s federal income taxes. If what you owe in taxes is less than the value of the credit, you can’t roll over the remaining amount of the credit to the following year.
Qualifying Requirements for the Tax Credit
To be eligible for the credit, you must meet certain requirements in addition to the energy efficiency requirement. The first is that a licensed contractor must install the HVAC unit. The unit also must be installed in your primary residence, meaning the place you live for more than 50% of the year. Another stipulation is that the credit is only available when replacing an HVAC unit in an existing home.
When filling out the form for the credit, you’re also required to include the manufacturer’s PIN number to prove that the new unit meets the energy efficiency requirement. You don’t need to include any other information about the installation. However, it’s still important that you keep all the paperwork, as you may be required to provide it if the IRS audits you.
Why You Need to Act Now to Take Advantage of the Credit
Under the Inflation Reduction Act, these HVAC tax credits were set to be available until the end of 2032. However, a new bill was recently passed that cancels this tax credit along with many others. As of now, the credit will only be available for qualifying equipment installed before the end of 2025.
You should act now if you want to take advantage of the credit and save yourself some money on your new HVAC system. The price of new HVAC equipment is also continually increasing. You’ll likely have to pay more if you decide to put off the installation or replacement until next year.
Other Available HVAC Incentives
There are other incentives that you may be eligible for when you install a certain type of HVAC unit. For instance, many utility companies offer their customers rebates for switching from a furnace to a heat pump. The Inflation Reduction Act also established the Home Energy Rebate Program.
This program allocates funding to individual states that they can then hand out as rebates to residents who install new ENERGY STAR-certified HVAC equipment or make other energy efficiency improvements. Unlike the tax credit program, these rebate programs have already been fully funded and will still be available until the allocated funding runs out.
Each participating state had to set its own rules and have them approved by the Department of Energy. These rebates are primarily available to low- and middle-income households and can potentially be worth anywhere from $8,000 to $14,000. In Indiana, residents could start applying for the rebates in May 2025. Kentucky hasn’t started accepting applications yet at the time of writing, but the state estimates that the program will start sometime in 2025.
With more than 25 years of experience, OnTIME Service is the company to look to when you need any cooling or heating services in Henderson, KY, or the Indiana area. We’re a Trane Comfort Specialist and offer a range of units that will qualify you for a tax credit. If you’re experiencing any issues with your HVAC system, we also offer expert repair and maintenance services.
To schedule a consultation and get help choosing the right replacement AC or heating unit for your home, contact us at OnTIME Service in Henderson today.
