To avoid rising energy costs and work toward a more sustainable life, many homeowners are trying new methods to maintain comfort levels while using less energy. Included in the Inflation Reduction Act, federal tax credits are available for high efficiency HVAC equipment. These credits offer big savings, as long as the homeowners select qualifying equipment and submit the appropriate form.
If you’re worried about a long, complicated process, maybe we can help! Northwest Services 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 portion 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 mitigate costs associated with installation and renovation projects. Of particular importance are the Energy Efficiency Home Improvement Credit and the Residential Clean Energy Credit.
But keep in mind, to earn any of the credits, you’ll have to complete IRS Form 5695. Additionally, this form needs to be submitted for the same tax year your upgrades were installed, not purchased.
Energy Efficiency Home Improvement Credit
Through 2032, the Energy Efficiency Home Improvement credit empowers homeowners by offsetting up to $3,200 annually for making your home more energy-efficient. This amounts to 30% of the total project’s cost. You should be aware that in order to be eligible for the maximum amount, you’ll have to make several investments. For example, you’ll save up to $2,000 for a new, high-efficiency heat pump. This can be paired with an additional $1,200 in credits for more projects in the tax year.
While new heat pump installation projects are a key target for this incentive, high-efficiency furnaces, air conditioners, boilers, and other HVAC systems are still eligible for this tax credit. You should confirm that your choice’s energy efficiency rating is sufficient to qualify.
Residential Clean Energy Credit
The Residential Clean Energy Credit amounts to roughly 30% savings on a number of other residential clean energy equipment upgrades. Eligibility is only extended to homeowners seeking to update existing or newly constructed homes. While the Home Improvement Credit highlights utilities and HVAC systems, this credit is instead designed around renewable energy sources like solar and wind energy.
Some specific items in this tax credit include requiring the installation project to be finished 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.
Additional Qualifications for Energy Tax Credits
Because HVAC systems are one of the biggest expenses on your energy bill, these tax credits offer more access 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
- Electrical panel upgrades
- Upgraded electrical wiring
- Insulation, air sealing and ventilation enhancements
- High-efficiency electric stoves, cooktops, ranges or ovens
- Efficient heat pump clothes drying solutions
- High-efficiency water boilers
Just like with installing one or more HVAC systems, you’ll need to check that your chosen products meet the required energy efficiency ratings.
Maximizing Your 2024 HVAC Tax Credits: Top 3 Tips
While any of these upgrades can enhance your home's energy performance, a little planning will ensure they offer the most long-term benefits. Get the most from your HVAC tax credits with these three tips:
- Conduct a home energy audit to identify impactful upgrades. Rely on professional HVAC assessments for crucial advice.
- Enhance your home's envelope by addressing inefficient windows and doors.
- Look into rebates for clean energy projects from utilities. Renewable sources like solar, wind, and geothermal contribute to community power grid sustainability.
- Remember to consider financing plans offered by service providers.
Northwest Services Can Help You Secure HVAC Credits for 2024
Partner with local HVAC professionals like Northwest Services for eligible serves like energy assessments or new installation. Our experienced installers can deliver whatever you need for home energy efficiency upgrades.