Tax Credits in the Inflation Reduction Act Enable Homeowners to Save Both Money and the Environment
If you’re a homeowner planning energy-efficient improvements to your home, you may be able to save a substantial amount of money through the Federal Energy Tax Credits contained in the Inflation Reduction Act (IRA) of 2022. Through this piece of legislation, you can “go green” while saving a substantial amount of money through federal tax credits.
A Quick Summary of the Inflation Reduction Act
This piece of legislation, signed into law in August 2022, attempts to simultaneously curb inflation, while also trying to address some of the major issues the nation faces in protecting the environment and providing citizens with access to health care.
Among its many features, the legislation includes clean energy tax breaks and other tax incentives enabling homeowners to save money by installing green energy upgrades in their homes.
The Energy Efficient Home Improvement Tax Credit (25C)
So, what qualifies for federal energy tax credits?
The tax credits in the IRA are an expansion of those earlier enacted under the Nonbusiness Energy Property Credit. The new, IRA (25C) tax credits that begin in 2023 and extend through 2032 provide homeowners with a tax credit of up to 30% of the installation costs for qualified expenditures, with a maximum cap of $1,200.
Under the provisions of the law
- Qualified air conditioners or furnaces may receive up to $600 each.
- Separately, qualified heat pumps can also receive up to $2,000, meaning a homeowner could claim up to $3,200 annually.
Additionally and very importantly, there are no income requirements for these tax credits, and 25C is no longer a “one-time” tax credit but an annual one.
What About Eligible Equipment Installed in 2022?
The good news here is that homeowners who had eligible HVAC equipment installed on or after January 1, 2022 may be eligible for retroactive tax credits.
Admittedly, these credits are not as robust as those for 2023, but will credit 10% of the cost of installing qualified equipment and 100% of the cost of installing qualified water heaters, heat pumps, central air conditioning systems, furnaces, hot water boilers, and air circulating fans.
However, with this tax credit, there is a lifetime limit of $500, or $300 for certain water heaters, heat pumps, and air conditioning systems installed in 2022.
And the Environment
One of the underlying aims of the IRA is to protect the environment by encouraging homeowners to install more energy-efficient HVAC systems, especially all-electric systems that completely eliminate the use of fossil fuels in the home.
This movement toward using electricity as the primary energy source in the home has the potential to significantly reduce carbon dioxide emissions and reduce the devastating effects of climate change.
Help from MSCO Heating & Cooling
We know that in this article we’ve compressed and provided a large amount of information, and you may well have questions about some of these facts and figures.
We will be glad to answer any of your questions about qualifying for the credits, as well as provide information on the qualifying, energy-saving HVAC equipment that we install from some of the nation’s leading manufacturers, including TRANE, Bosch, and Mitsubishi.
Please don’t hesitate to contact us and give us at MSCO Heating & Cooling the opportunity to help you have a more energy-efficient home, save money, protect the environment, and enjoy home comfort the year around.