To combat increasing energy expenses and embrace sustainability, many homeowners are looking for ways to enjoy the same standards of comfort while reducing utility bills. With help from the Inflation Reduction Act, federal tax credits are available for energy-efficient home upgrades, especially HVAC systems like air conditioners. These credits offer significant savings, provided that homeowners use eligible equipment and submit the right paperwork.
If you’re worried about a long, complicated process, we can share something that will help! Bishop’s HVAC hopes this guide will provide all the information necessary to take full advantage of HVAC tax credits this year. Here’s what you’ll need to do.
How Do These Tax Credits Work?
These valuable tax credits for upgrading your home to be more energy-efficient are just one goal 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 main intention of these credits is to reduce the cost of installing high efficiency upgrades. Two of note are the Energy Efficiency Home Improvement Credit and the Residential Clean Energy Credit.
But keep in mind, to be eligible for tax credits, you’ll have to complete IRS Form 5695. Additionally, this form needs to be submitted for the same tax year your upgrades were installed, not bought.
Maximizing Savings with the Energy Efficiency Home Improvement Credit
Through 2032, the Energy Efficiency Home Improvement credit empowers homeowners by offsetting up to $3,200 every year for energy-efficient home upgrades. This equals 30% of the total project’s cost. You should be aware that in order to be eligible for the maximum amount, it means making severel investments. For example, you’ll receive 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. It will help to confirm the make and model’s energy efficiency rating is sufficient to qualify.
Residential Clean Energy Credit
The Residential Clean Energy Credit offers 30% savings on a wide range of residential clean energy efficiency projects. Eligibility is restricted to homeowners seeking to update existing or newly constructed homes. 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.
What Else Is Eligible for These Tax Credits?
Because HVAC systems are one of the major reasons for high energy bills, these tax credits can guide you to the most energy-efficient options. But home energy efficiency can be improved in lots of 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
- Modern electrical panel improvements
- New electrical wiring
- Enhancements to insulation, air sealing, and ventilation
- High-efficiency electric stoves, cooktops, ranges or ovens
- Heat pump clothes dryers
- Water boilers
Just like with installing one or more HVAC systems, you’ll need to verify that your preferred make and model features the eligible energy efficiency ratings.
Three Tips for Making the Most of 2024 HVAC Tax Credits
While any one of those upgrades can boost home energy efficiency, some planning ahead will ensure more long-term benefits. Get the most from your HVAC tax credits with these three tips:
- Conduct a home energy audit to identify impactful upgrades. Trust experienced HVAC companies to pinpoint essential products and services.
- Enhance your home's envelope by addressing inefficient windows and doors.
- Look into rebates for clean energy projects from utilities. 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.
Secure Your 2024 HVAC Credits with Help from Bishop’s HVAC
Partner with local HVAC professionals like Bishop’s HVAC for help with home energy audits and new installation projects. Our helpful installers will deliver everything you need for home energy efficiency upgrades.