Ways to Benefit from the HVAC Federal Tax Credit

ENERGY STAR tax credits are incentives offered by the government for homeowners who install certain energy-efficient upgrades. These upgrades include new HVAC systems. Equipment must be set up in a current house as your primary residence. It includes houses, townhouses, mobile homes, condos, and cooperative apartments. Lennox offers a broad selection of products eligible for these 25C tax credits.

Know What You Are Eligible For

Several incentives are available to homeowners who invest in high-efficiency HVAC systems. But what is HVAC system? HVAC comprises combination systems like heat pumps, indoor air-quality tools like air purifiers, and your air conditioner and furnace. It includes everything, even the smart thermostats and control systems that make everything function. The federal government offers tax credits for eligible energy-efficient products. These credit programs are based on the Inflation Reduction Act (IRA) and provide cost-saving opportunities to help you reduce your carbon footprint.

The previous Nonbusiness Energy Property credit of $500 was extended through 2022, and it has since been replaced with an amended credit that allows you to claim up to $2,000 in tax credits for a qualified air conditioner or gas furnace, heat pump water heater, or boiler. These new credits are also available to homeowners who still need to claim a qualifying home improvement during years before 2017.

You can use this credit by obtaining proof of purchase and installation for your system, such as an AHRI certificate or manufacturer certification. This proof can be submitted when you file your taxes. It is important to keep in mind that this credit applies to homes used as your primary residence. It does not apply to new construction or rental properties.

If you’re considering a heating or cooling upgrade, now is the time to speak with an HVAC professional. They can help you locate a certified builder and ensure your equipment is eligible for the federal tax credit.

Schedule Your Installation

The new federal tax credit greatly incentivizes upgrading your heating and cooling system. This tax credit applies to installing certain high-efficiency heat pumps or air conditioners. It’s also available for various energy-saving home improvements, including insulation, sealing air leaks, and electrical circuit panels and windows upgrades. When you file your taxes, you can claim a credit of up to 30% of the installation expenses of eligible projects. It is a non-refundable personal tax credit, reducing your federal taxes dollar-for-dollar. You can claim up to $500 in annual credits; unused credits carry over into future filing years. The project must be done in your primary residence. It includes a house, condominium, cooperative apartment or manufactured home. It can’t be in a rental property. The credit is also only available for homes built after Jan. 1, 2023, and it won’t benefit homes upgraded before that date. If you’re ready to take advantage of this wonderful opportunity, the first step is to contact a local HVAC contractor certified by your equipment manufacturer. A certified contractor can verify your equipment qualifies and handle the necessary paperwork. It’s also a good idea to check with your local utility company for possible rebates that may be available.

Contact Your Tax Consultant

You should install a high-efficiency HVAC system in your home. In that case, claiming a tax credit for the installation costs may be possible. These credits are available through the Nonbusiness Energy Property Credit and are designed to help homeowners offset the cost of upgrading their equipment with new, energy-efficient systems. The new equipment must meet certain energy efficiency criteria to qualify for this tax credit. All ENERGY STAR-certified systems are eligible for this incentive. The credit is capped at 30% of the total project costs and is renewable yearly, so it’s not permanent. The tax credit also applies to ductless and heat pump systems, as well as boilers and furnaces that reach a high level of energy efficiency. Speaking with an experienced tax professional before making any changes to your home or business is important, depending on your situation. Kobie Complete is happy to provide a referral to an accountant or tax specialist who can answer any additional questions you may have about this important tax credit.

Fill Out the Form

If you had a new heat pump, air conditioner, or furnace installed in 2022, you could claim up to a credit of $300 or $500, depending on the unit’s energy efficiency. These credits aren’t as large as the ones offered in 2023, but they can still help you save money on energy costs. The new air conditioner or heat pump needs to be set up in your primary house and adhere to ENERGY STAR guidelines. It is a nonbusiness energy property tax credit and can be claimed if you have enough federal income tax liability to offset the credit. When filling out the IRS Form 5695, you must include the cost of your new sustainable HVAC system and the manufacturer’s certification statement. This form should be kept for future reference and filed with your yearly tax returns.

The ENERGY STAR program’s website has an easy-to-use worksheet that will help you calculate your credit limit. It will also tell you if you have any remaining credit from previous years that can be carried over to the current year. You should always contact a qualified tax professional for more information about your situation. You can find the manufacturer certificate here. 

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