Energy Efficiency Incentives in the Inflation Reduction Act of 2022
The Inflation Reduction Act of 2022 provides many incentives to make energy-efficiency upgrades to a home. Homeowners can receive substantial rebates and credits for installing high-efficiency heating, cooling, and water-heating systems. Installing heat pumps comes with the most considerable financial incentives by far.What Is a Heat Pump?
A heat pump is an efficient HVAC system that both heats and cools a home in place of a furnace and an air conditioner. Heat pumps operate by using the ambient air temperature outside and either absorbing or releasing heat to the indoors. A heat pump’s main advantage is that it can use much less energy than many types of traditional HVAC systems by “moving” heat instead of generating it.
By using cleaner energy sources (typically electricity), heat pumps may be more sustainable than other HVAC systems. Furthermore, the latest models can perform effectively in even chilly climates.
Recent studies have suggested that heat pumps can offer greater cost-effectiveness when factoring in installation costs over the long term than other heating systems. In some parts of the country, heat pumps are already more affordable to install than other traditional HVAC systems.
What Does the Federal Tax Credit Cover?
The federal tax credit covers up to 30% of qualifying heat pumps’ purchase and installation labor costs (up to $2,000). This credit applies to new and existing homes and can be claimed in the same tax year as the purchase was made, starting in 2023 and ending in 2032.Which Heat Pumps Are Eligible for the Federal Tax Credit?
To qualify for this credit, your heat pump must meet the top-tier efficiency requirements set by the Consortium for Energy Efficiency (CEE), aka. the CEE Advanced Tier.
The tax credit program incentives apply to systems installed on January 1, 2023, and the program will last through the end of 2032. If you installed a heat pump during 2022, you might be eligible for a tax credit of up to $300, as long as your heat pump meets the CEE’s highest efficiency tier.
