To combat increasing energy expenses and embrace sustainability, 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 energy-efficient home upgrades, especially HVAC systems like air conditioners. These credits offer significant savings, as long as the homeowners choose eligible equipment and submit the appropriate form.
If you’re trying to avoid a long process, we can share something that will help! Kohles & Bach Heating & Cooling hopes this guide will provide all the information necessary to take full advantage of HVAC tax credits this year. Here’s how.
How Do These Tax Credits Work?
These valuable tax credits for upgrading your home to be more energy-efficient 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 reduce the cost of installing high efficiency upgrades. Two of note are the Residential Clean Energy Credit and the Energy Efficiency Home Improvement Credit.
However, to earn any of the credits, you’ll have to fill out IRS Form 5695. Additionally, this form is submitted during the same tax year any 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 every year for installing higher efficiency home upgrades. This can be up to 30% of the total project’s cost. It's important to note in order to receive the maximum amount, you’ll have to make several investments. For example, you’ll get 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 heat pumps are a key target for this incentive, other HVAC upgrades like efficient furnaces and air conditioners also qualify. You’ll need to confirm that your choice’s energy efficiency rating is high enough for eligibility.
Residential Clean Energy Credit
The Residential Clean Energy Credit amounts to roughly 30% savings on a wide range of residential clean energy equipment upgrades. Eligibility is restricted to homeowners seeking to update existing or newly constructed homes. While the Home Improvement Credit highlights utilities and HVAC systems, this credit targets 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 make things a little easier when investing in renewables.
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:
- Heat pump water heaters
- Modern electrical panel improvements
- Upgraded electrical wiring
- Insulation, air sealing and ventilation enhancements
- Energy-efficient cooking appliances like stoves, cooktops, and ovens
- Efficient heat pump clothes drying solutions
- High-efficiency water boilers
Just like with installing one or more HVAC systems, you’ll need to verify that your chosen products meet the required energy efficiency ratings.
Three Tips for Making the Most of 2024 HVAC Tax Credits
While any of these upgrades can enhance your home's energy performance, some planning ahead 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. Rely on professional HVAC assessments for crucial advice.
- Install new high efficiency 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.
Secure Your 2024 HVAC Credits with Help from Kohles & Bach Heating & Cooling
Partner with local HVAC professionals like Kohles & Bach Heating & Cooling for eligible serves like energy assessments or new installation. Our helpful installers can deliver whatever you need for home energy efficiency upgrades.