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. With help from 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 use qualifying equipment and submit the appropriate form.
If you’re concerned the application process might be tedious, we’re offering to help! Northwest Services hopes this guide will give you what you need to secure 2024’s HVAC tax credits. Here’s what you’ll need to do.
How Do These Tax Credits Work?
These valuable tax credits for energy-efficient home improvements are just one intended use 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 reduce the cost of installing high efficiency upgrades. Of particular importance are the Energy Efficiency Home Improvement Credit and the Residential Clean Energy Credit.
Don’t forget, in order to be eligible for tax credits, you’ll have to complete IRS Form 5695. Additionally, this form needs to be submitted during 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 provides up to $3,200 each year for making your home more energy-efficient. This equals 30% of the total project’s cost. You should be aware that in order to receive the maximum amount, it involves making different investments. For example, you’ll get up to $2,000 for high efficiency heat pump systems. This can be paired with an additional $1,200 in credits for more projects in the tax year.
While new heat pump installation projects are a key target for this incentive, other HVAC upgrades like efficient furnaces and air conditioners also qualify. You’ll need to confirm the make and model’s energy efficiency rating is sufficient to qualify.
Residential Clean Energy Credit
The Residential Clean Energy Credit provides 30% savings on a variety of residential clean energy efficiency projects. Eligibility is only extended to homeowners looking for new clean energy solutions for their home. While the Home Improvement Credit works primarily with 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 make things a little easier when investing in renewables.
Additional Qualifications for Energy Tax Credits
Because HVAC systems are one of the major reasons for high energy bills, these tax credits incentivize 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
- Upgraded electrical wiring
- Enhancements to insulation, air sealing, and ventilation
- High-efficiency electric stoves, cooktops, ranges or ovens
- Efficient heat pump clothes drying solutions
- Water boilers
Like the HVAC systems, you’ll need to check that your chosen products meet the required energy efficiency ratings.
Maximizing Your 2024 HVAC Tax Credits: Top 3 Tips
While all the listed upgrades can boost home energy efficiency, a little planning will ensure more long-term benefits. Get the most from your HVAC tax credits with these three tips:
- 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.
- 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.
Northwest Services Can Help You Secure HVAC Credits for 2024
Partner with local HVAC professionals like Northwest Services for help with home energy audits and new installation projects. Our seasoned installers know how to provide all you need for a more energy-efficient home.