What are heat pump tax credits?

By installing a qualified air source heat pump, you can qualify for a heat pump tax credit of up to $2,000. This is the largest IRA incentive for any single project. You may qualify if you’re replacing an old heat pump and installing a new one that meets the Consortium for Energy Efficiency (CEE) tier requirements in your region. Today’s heat pumps are suitable for homes in any climate. If you’re in a northern state with frigid winters, consider a dual-fuel heat pump system. This is when you install a heat pump and gas furnace together, getting the best of both worlds as the furnace can kick on to help keep you comfortable no matter the outdoor temperature.

What is an energy star tax credit?

Part of the The Inflation Reduction Act, Energy Star tax credits promote energy efficient home improvement and are available for 30% of costs, up to $2,000. Stacking tax credits is possible, and this can be combined with the Residential Clean Energy credit. These residential energy credits are good through 2032, stepping down to 22% for 2033 and 2034.

What is the 25c tax credit?

Part of the The Inflation Reduction Act, Energy Star tax credits promote energy efficient home improvement and are available for 30% of costs, up to $2,000. Stacking tax credits is possible, and this can be combined with the Residential Clean Energy credit. These residential energy credits are good through 2032, stepping down to 22% for 2033 and 2034.

What is a federal tax credit for HVAC?

Part of the The Inflation Reduction Act, Energy Star tax credits promote energy efficient home improvement and are available for 30% of costs, up to $2,000. Stacking tax credits is possible, and this can be combined with the Residential Clean Energy credit. These residential energy credits are good through 2032, stepping down to 22% for 2033 and 2034.

Energy Savings3min read

Save Money and the Planet with the New Energy Home Improvement Tax Credit (25C)

The Inflation Reduction Act (IRA) offers great tax incentives to boost your home comfort and help slash your energy bills.

April 17, 2023

There is a blue piece of paper that reads "Inflation Reduction Act."

Are you planning home improvements to enhance your home's energy efficiency? If so, the Inflation Reduction Act's Energy Efficient Home Improvement Tax Credit (25C) could save you money on your upgrades and also help you reduce your carbon footprint. The IRA includes several tax credits that incentivize homeowners to buy qualifying high-efficiency HVAC systems, such as furnaces, ACs, heat pumps, and more. This exciting initiative aims to help Americans go green and save money in the process.

How does the Inflation Reduction Act work?

The Inflation Reduction Act (IRA) is a key bill designed to address some of the most significant issues the United States is facing, such as climate control and healthcare. The $740 billion climate and healthcare legislation signed into law in August 2022 includes clean energy tax credits and other relevant tax incentives that homeowners can benefit from when they make green upgrades.

What is the Energy-Efficient Home Improvement Tax Credit (25C)?

The Energy Efficient Home Improvement Tax Credit (25C) is one of the most important aspects of the IRA for homeowners. This tax credit, formerly known as the Nonbusiness Energy Property Credit, is new and improved through the IRA and provides opportunities to save on your energy-efficient upgrades. Interested in the particulars? Here’s what you need to know:

Starting in 2023, the tax credit provides homeowners with up to 30% of the installation costs for qualified expenditures. This tax credit program lasts until December 31, 2032.

Under the 25C credit, there is an annual cap of 30% of the installed costs, with a maximum of $1,200. Qualified air conditioners or furnaces may receive up to $600 each. There is also a separate annual limit of $2,000 for qualified heat pumps, which means a homeowner could claim up to $3,200 in credits annually.

Note: The IRS has not yet defined the filing process for 2023. Check back for updates.

Additionally, there are no income requirements for this tax credit, and starting in 2023, 25C is no longer a ‘one-time’ credit, but an annual one.

What if you had eligible equipment installed in 2022?

If you installed eligible HVAC equipment on or after January 1, 2022, you might be eligible for retroactive tax credits under this program. Although the 2022 tax credit is not as robust, it will credit 10 percent of the costs of installing qualified equipment and 100 percent of the costs associated with installing qualified water heaters, heat pumps, central air conditioning systems, furnaces, hot water boilers, and air circulating fans.

How does the Home Improvement Tax Credit (25C) help the environment?

The Home Improvement Tax Credit (25C) is designed to accelerate the adoption of high-efficiency HVAC systems by homeowners. Higher-efficiency HVAC systems consume less power and help lower monthly utility bills for homeowners. Homeowners can also reduce fossil fuel usage of their HVAC system by upgrading to a hybrid heat system that combines a furnace and a heat pump (such systems could qualify for more than $2,000 in tax credits), or eliminate fossil fuel usage entirely by going with an all-electric heat pump and air handler system.

These environmentally-friendly HVAC options can significantly reduce carbon dioxide emissions and mitigate the devastating impacts of climate change. The Home Improvement Tax Credit (25C) rewards homeowners for making this switch.

Your local American Standard dealer can help

American Standard offers several products that qualify for the 25C tax credit. For more information on cost and energy savings, including how to take advantage of the latest rebates, visit American Standard's credits, rebates, and offers page, and contact your local American Standard HVAC professional. A local tax professional can also assist you in confirming your tax eligibility.