What Is the Federal HVAC Tax Credit?

Do you need to upgrade your old HVAC system? If you have a new HVAC system installed in 2023, you could qualify for a federal HVAC tax credit! As part of the Inflation Reduction Act, this credit applies to anyone installing an HVAC system that meets qualified energy efficiency improvements. Updated heat pumps will provide the greatest benefits among those incentives.

So, what does the federal HVAC tax credit entail? As an expert provider of HVAC services in Boiling Springs, SC, Smooth Sailing Heating & Cooling breaks down the basics for you. If you want to take advantage of these tax credits, call us at (864) 689-2303 to get started! 

The Inflation Reduction Act

With $737 billion earmarked for the incentive, the federal HVAC tax credit aims to persuade home and business owners alike to upgrade parts of their HVAC systems, including heat pumps and other parts. As part of the Inflation Reduction Act, the incentives help achieve two goals: lower the cost of living and improve national energy efficiency. 

As inflation spikes, American families have difficulty affording bill payments and purchasing necessary items. When home and business owners use outdated, damaged HVAC systems, their energy bills increase. Therefore, energy-efficient air conditioners address both concerns. But if you struggle to pay your monthly bills, how can you afford a brand-new installation? By using the tax credit, of course! 

State Incentives vs. Federal Incentives

Many states, including South Carolina, have already installed rebate programs to help you afford an energy-efficient HVAC system. Whether you can combine federal incentives with state incentives remains uncertain. But if a state’s program stands alone without federal funding, you might have the ability to use both. 

The Inflation Reduction Act’s current wording doesn’t prevent you from using both. However, state governments will reevaluate and shift how their programs work in the meantime. Stay updated on state-level decisions to learn whether you can use both incentives in 2023 to make your home more energy efficient. 

Homeowners

The 25C credit covers up to $1,200 per year in installments and home improvements related to energy efficiency. Therefore, you can make improvements each year and receive up to $1,200 to cover costs. Half of the credit, or $600, goes toward HVAC replacement. The other $600 covers upgraded doors, windows, and other building components. 

In other words, you can replace your outdated oil furnaces with a new, efficient HVAC system. Your credit will help pay for the purchase and installation. You can take advantage of this credit every year until it expires in 2032. The decreasing energy bills will also help offset the initial cost.

Once you have installed a qualifying HVAC system, you might receive a $2,000 credit. You can also have your home audited for a $150 credit. You must choose a qualified auditor backed by ENERGY STAR to earn it. 

Commercial Buildings

The Inflation Reduction Act makes some credits available to owners of commercial buildings as well. When you document a 25% decrease in energy use, you reduce your taxes by 50 cents for each square foot in the building. Any extra points above 25% add 2 cents to your reduction. 

To qualify for these breaks, you must have an HVAC system that meets ASHRAE and 90.1 standards. Once your system meets all listed standards, your deduction could increase to $5 per square foot, giving you an energy-efficient business that saves on your monthly expenses. 

Construction Companies

Construction companies that build residencies can use the 45L credit available through 2032. Applicable buildings include single-family, multi-family, and mobile homes. If your construction company builds homes that meet the standards provided by the Department of Energy, you can receive federal HVAC tax credits. 

The credit amount ranges from $2,500 to $5,000 for single-family residences. The amount depends on how well the building meets ENERGY STAR standards. 

With multi-family buildings, you can earn $500 per unit if it meets the minimum qualifications. When it meets all requirements, the credit increases to $1000 per unit. When a company follows wage requirements for employees, the credit continues increasing.

Get Smooth Sailing on the Installation Job

If you want to get your commercial or residential building up to energy-efficient standards, book your installation with Smooth Sailing Heating & Cooling. Our technicians have the expertise, knowledge, and training necessary to help you make the most of the federal HVAC tax credit. With 2023 right around the corner, book your AC installation services with us today at (864) 689-2303.