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 a big chunk of the installation costs, provided that homeowners select qualifying equipment and submit the right paperwork.
If you’re concerned the application process might be tedious, we’re offering to help! Pratt Brothers 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 boosting your home’s energy efficiency are just one intended use 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 Residential Clean Energy Credit and the Energy Efficiency Home Improvement Credit.
Don’t forget, to apply for the credits, you’ll have to fill out IRS Form 5695. Additionally, this form is submitted within the same tax year the upgrades were installed, not bought.
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 each year for making your home more energy-efficient. This equals 30% of the total project’s cost. It's important to note 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 installing a higher 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 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. You should 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 wide range of residential clean energy efficiency projects. Eligibility is only extended to homeowners seeking to update existing or newly constructed homes. While the Home Improvement Credit focuses on utilities and HVAC systems, this credit is more about renewable energy sources like solar and wind energy.
Some provisions of the tax credit include the requirement that installation must occur 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 soften the entry into investing in clean energy.
What Else Is Eligible for These Tax Credits?
Because HVAC systems are one of the biggest portions of your monthly energy costs, 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:
- Heat pump water heaters
- Electrical panel upgrades
- New 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 confirm that your chosen products meet the required energy efficiency ratings.
Three Tips for Making the Most of 2024 HVAC Tax Credits
While any one of those upgrades can enhance your home's energy performance, a little planning will ensure the best chance at more long-term benefits. Maximize 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.
- Improve your home's thermal efficiency with better 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.
- Don’t forget financing options from local service companies, which can help reduce costs even more.
Secure Your 2024 HVAC Credits with Help from Pratt Brothers
Partner with local HVAC professionals like Pratt Brothers for eligible serves like energy assessments or new installation. Our helpful installers will deliver everything you need for a more energy-efficient home.