In August, the U.S. Government passed the Inflation Reduction Act, a comprehensive energy policy bill with a record $370 billion in reserved spending for climate and energy initiatives. This legislation offers several tax credits that reward homeowners for purchasing higher efficiency, ENERGY STAR-certified and Consortium for Energy Efficiency-specified equipment.
Most important information for today – 25C Tax Credit
The 25C Tax Credit (The Nonbusiness Energy Property Tax Credit) has been revived and gives homeowners a tax credit for energy efficiency upgrades.
- Credit revived and made retroactive for 2022 (at original 10%)
- Starting in 2023, credit increases to 30% of total installation costs through 2032
- The lifetime cap of $500 will be replaced by a cap of $600 for qualified air conditioners and $600 for qualified furnaces
- Heat pumps and heat pump water heaters are eligible for a credit of up to $2,000 per year
- Eligible products have not been finalized
Residential Energy Efficient Property (Section 25D)
This tax credit gives homeowners equal to 30% of installation costs for ENERGY STAR geothermal heat pumps until 2032. Percentages drop in 2033 and 2034.
45L Tax Credit – Energy Efficient Home and Multifamily Credit
This tax credit, available for single-family and multifamily homebuilders, has also been revived and made retroactive in 2022.
- Starting in 2023, credit increases to $2,500 for single family homes meeting the ENERGY STAR Residential New Construction Program
- DOE Zero Energy Ready single family homes can earn up to $5,000
- Credits are also available for Multifamily homes, by dwelling unit eligible
HVAC is included in two rebate programs. The Home Energy Performance-Based Whole-House Rebate covers whole house improvements to single family and multifamily homes. The High-Efficiency Electric Home Rebate Program covers electrical appliance improvements to low and moderate income single family and multifamily homes. These programs are not yet finalized but will begin in 2023.
More information on HVAC credit can be found on the ENERGY STAR website.