To avoid rising energy costs and work toward a more sustainable life, many homeowners are looking for ways to enjoy the same standards of comfort while reducing utility bills. As part of 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 select eligible equipment and submit the appropriate form.

If you’re worried about a long, complicated process, maybe we can help! Herman Allen Plumbing, Heating & Cooling hopes this guide will give you everything you need to earn these HVAC tax credits in 2024. Here’s how.

How Do These Tax Credits Work?

These valuable tax credits for upgrading your home to be more energy-efficient are just one small part of the recent Inflation Reduction Act. Energy costs affect everyone, so helping homeowners upgrade to higher efficiency utilities can benefit everyone. The primary goal of these credits is to mitigate costs associated with installation and renovation projects. The two we’ll cover are the Energy Efficiency Home Improvement Credit and the Residential Clean Energy Credit.

But keep in mind, to earn any of the credits, you’ll need to fill out IRS Form 5695. Additionally, this form is submitted within the same tax year your upgrades were installed, not purchased.

Energy Efficiency Home Improvement Credit

Through 2032, the Energy Efficiency Home Improvement Credit provides up to $3,200 every year for installing higher efficiency home upgrades. This amounts to 30% of the total project’s cost. You should be aware that in order to receive the maximum amount, it involves making different investments. For example, you’ll receive up to $2,000 for a new, high-efficiency heat pump. This can be combined with the remaining $1,200 in credits for other eligible upgrades made within the tax year.

While heat pumps are a key target for this incentive, high-efficiency furnaces, air conditioners, boilers, and other HVAC systems are still eligible for this tax credit. You should confirm the make and model’s energy efficiency rating is high enough for eligibility.

Exploring the Residential Clean Energy Credit

The Residential Clean Energy Credit offers 30% savings on a variety of residential clean energy equipment upgrades. Eligibility only applies 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 key details of this tax credit include requiring the installation project to be finished between 2022 and 2032. But at the same time, homeowners can carry forward excess credit to offset future tax obligations. This is a great way to spread out costs and keep them more manageable.

Additional Qualifications for Energy Tax Credits

Because HVAC systems are one of the major reasons for high energy bills, these tax credits incentivize 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:

  • Energy-saving heat pump water heating systems
  • Electrical panel upgrades
  • Upgraded electrical wiring
  • Insulation, air sealing and ventilation enhancements
  • High-efficiency electric stoves, cooktops, ranges or ovens
  • Efficient heat pump clothes drying solutions
  • High-efficiency water boilers

Just like with installing one or more HVAC systems, you’ll need to verify that your chosen products meet the eligible energy efficiency ratings.

Three Tips for Making the Most of 2024 HVAC Tax Credits

While any one of those upgrades can enhance your home's energy performance, some planning ahead will ensure more long-term benefits. Get the most from your HVAC tax credits with the following three tips:

  1. Conduct a home energy audit to identify impactful upgrades. Rely on professional HVAC assessments for crucial advice.
  2. Enhance your home's envelope by addressing inefficient windows and doors.
  3. Look into rebates for clean energy projects from utilities. Renewable sources like solar, wind, and geothermal contribute to community power grid sustainability.
  4. Don’t forget financing options from local service companies, which can help reduce costs even more.

Herman Allen Plumbing, Heating & Cooling Can Help You Secure HVAC Credits for 2024

Partner with local HVAC professionals like Herman Allen Plumbing, Heating & Cooling for help with home energy audits and new installation projects. Our experienced installers know how to provide all you need for a more energy-efficient home.