HVAC Tax Credits: 2024 Guide

What to Know About Government Rebates on Home Comfort Systems

Government tax credits for HVAC systems have garnered attention in recent months, promising potential savings in the future. However, it’s important to note these rebates aren’t guaranteed in every state and could lead to increased costs when upgrading to a high-efficiency system.

Exercise caution with HVAC quotes that itemize tax credits or rebates to lower the net cost. Since these rebates are not assured, they should not serve as an incentive for buying a new system. Instead, consider HVAC tax credits as a potential bonus after securing a favorable deal on an HVAC system initially.

At HVAC.com, we prioritize fair pricing from the outset. We can provide a quote within 24 hours and connect you with a top-rated installer in your area, typically saving an average of 20% on the project’s total cost. Afterward, explore the availability and cost-effectiveness of tax credits.

What Is the Inflation Reduction Act?

The Home Energy Rebates Program, part of the Inflation Reduction Act signed by President Biden in August 2022, notably expanded or extended HVAC tax credits that were previously available under the Energy Policy Act of 2005. The new federal rebates for HVAC systems run through 2032 and include $8.8 billion for the Home Energy Rebates, according to the U.S. Department of Energy.

Inflation Reduction Act tax credits are benefits from the government when taxpayers make energy-efficient upgrades to their property. Along with potential credits for central air conditioners, heat pumps, furnaces, and boilers, improvements may also include installing solar panels, windows, insulation, and more. If the rebates become available, taxpayers won’t receive an immediate discount, but they may be eligible for an HVAC tax credit when they file their taxes.

Are HVAC Tax Rebates Available Yet?

As of June 14, 2024, New York is the only state where funding is currently available; California and Hawaii recently had their applications approved, according to the U.S. Department of Energy. Fourteen states have submitted applications pending approval, while others are still in the preparation phase.

It remains uncertain how many states will ultimately submit applications and have them approved.

Which Tax Credits Are Potentially Available for HVAC Systems?

The rebates would apply for heating and cooling systems installed between Jan. 1, 2023, and Dec. 31, 2032. The following HVAC tax credits could be available if your state submits an application and has it approved.

Air-Source Heat Pumps

• Tax Credit Available: 30% of the total project cost, up to $2,000
• Eligibility Requirements:
  • South: All heat pumps that are Energy Star certified
  • North: Heat pumps designated as Energy Star Cold Climate units with an EER > 10

Central Air Conditioners

• Tax Credit Available: 30% of the total project cost, up to $600
• Eligibility Requirements: SEER > 16

Natural Gas and Oil Furnaces

• Tax Credit Available: 30% of the total project cost, up to $600
• Eligibility Requirements:
  • Natural gas furnaces: AFUE > 97%
  • Oil furnaces: Rated by the manufacturer for use with fuel blends containing at least 20% biodiesel, renewable diesel, or second-generation biofuel

Natural Gas, Oil, and Propane Boilers

• Tax Credit Available: 30% of the total project cost, up to $600
• Eligibility Requirements:
  • Natural gas boilers: AFUE > 95%
  • Oil boilers: Rated by the manufacturer for use with fuel blends containing at least 20% biodiesel, renewable diesel, or second-generation biofuel

The total limit for an efficiency tax credit in one year is $3,200. The restriction includes a maximum credit of $1,200 for any combination of home energy improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers, and central air conditioners. The remaining $2,000 credit is available with any combination of heat pumps, heat pump water heaters, and biomass stoves/boilers.

Are HVAC Tax Credits Worth It?

If tax rebates become available in your state, are they actually worth it? While HVAC tax credits for high-efficiency comfort systems may appear enticing on the surface, they don’t apply to every heating and cooling system – they must meet the federal government’s strict guidelines on energy efficiency as detailed in this article. High-efficiency heating and cooling systems can cost thousands more compared to mid-range units.

For example, if you qualify for $2,000 in rebates, but the difference in buying a 14 SEER unit compared to a 16 SEER system is $2,500 or more, it might not be worth applying for the tax credit. Similarly, choosing between a standard 80% AFUE furnace and a 97% model that meets the IRA’s guidelines could result in a price difference of $3,000 or more.

HVAC.com Ensures You Receive a Fair Price on an HVAC System

HVAC.com understands the importance of balancing cost-effectiveness with energy efficiency. Our unique position saves customers money while always giving them the right solution for their homes. On average, homeowners save 20% on their HVAC projects when they partner with HVAC.com.