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 upgrading to more efficient HVAC systems, such as air conditioners. These credits offer significant savings, as long as the homeowners work with eligible equipment and submit the appropriate form.
If you’re concerned the application process might be tedious, maybe we can help! Western Mechanical, Inc. 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 goal of the recent Inflation Reduction Act. With the higher cost of energy making an impact, helping more homeowners upgrade their equipment is always beneficial. The key provision of these credits is to help pay for high efficiency HVAC equipment and other projects. Two of note are the Residential Clean Energy Credit and the Energy Efficiency Home Improvement Credit.
But remember, in order to apply for the credits, you’ll need a completed IRS Form 5695. Additionally, this form has to be submitted for the same tax year any 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 every year for energy-efficient home upgrades. This equals 30% of the total project’s cost. Keep in mind that in order to receive the maximum amount, you’ll have to make several investments. For example, you’ll get up to $2,000 for a new, high-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, other HVAC upgrades like efficient furnaces and air conditioners also qualify. It will help to confirm the make and model’s energy efficiency rating is sufficient to qualify.
Residential Clean Energy Credit
The Residential Clean Energy Credit amounts to roughly 30% savings on a variety of residential clean energy equipment upgrades. 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 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 carry forward excess credit to offset future tax obligations. This is a great way to spread out costs and keep them more manageable.
Additional Qualifications for Energy Tax Credits
Because HVAC systems are one of the biggest portions of your monthly energy costs, these tax credits incentivize the most energy-efficient options. But home energy efficiency can be improved in lots of 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
- High-efficiency electric stoves, cooktops, ranges or ovens
- Heat pump clothes dryers
- High-efficiency water boilers
Just like with installing one or more HVAC systems, you’ll need to verify that your chosen products meet the eligible energy efficiency ratings.
Maximizing Your 2024 HVAC Tax Credits: Top 3 Tips
While all the listed upgrades can improve your home’s energy efficiency, a little planning will ensure they offer the most long-term benefits. Get the most from your HVAC tax credits with these reminders:
- Conduct a home energy audit to identify impactful upgrades. Trust experienced HVAC companies to pinpoint essential products and services.
- Install new high efficiency 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.
- Don’t forget financing options from local service companies, which can help reduce costs even more.
Secure Your 2024 HVAC Credits with Help from Western Mechanical, Inc.
Partner with local HVAC professionals like Western Mechanical, Inc. for eligible serves like energy assessments or new installation. Our seasoned installers can deliver whatever you need for a more energy-efficient home.