Tax Credits and Rebates For Energy Efficient HVAC Systems

The cost of energy today is rising rapidly and homeowners in the US are looking for various ways to reduce this cost without compromising the comfort and efficiency of their HVAC systems. In this article, let us explore some of the tax credits and rebates for energy efficient HVAC systems and help you find the options to increase your annual savings on energy expenditure. One of the most suitable options is that you upgrade your HVAC systems to more modern and more Energy Efficient HVAC systems. However, the upfront cost for the same can be incredibly high. But do not worry. The good news is that there are huge financial incentives available to help you minimize this initial cost. 

Huge demand for energy and the need for energy efficiency Systems

Before we explore the energy-saving options, let us first understand why it is important to switch to energy efficient HVAC systems. According to the US Environmental Protection Agency (EPA), it is estimated that heating and cooling consume almost half (48%) of the total energy produced in American homes. 

This huge number indicates that a huge portion of the energy bills goes into heating and cooling and cooling only and contributes to greenhouse gas emissions as well. Therefore, upgrading to energy-efficient HVAC systems helps reduce a home’s energy consumption and ultimately lowers overall energy bills along with a smaller environmental footprint.

Federal Tax Credits for Energy Efficient Home Improvements

The Inflation Reduction Act of 2022 extended and expanded tax credits for energy-efficient home improvements, including HVAC systems. This act helps US homeowners to claim a non-refundable tax credit for a percentage of the cost of qualified equipment and their installation. 

Here’s a breakdown of the current federal tax credits for specific HVAC systems:

1. Central Air Conditioners

Central AC systems that qualify ENERGY STAR-rated systems having a SEER2 rating of 16 or higher are eligible for tax credit and you can claim a tax credit of 30% of its total cost. However, it is capped at $600.

2. Air-source Heat Pumps

They are multi-purpose systems that help homeowners with both heating and cooling. The qualifying heat pumps can help you enjoy a tax credit of 30% on the installation costs. It is generously capped at $2000.

3. Furnace and Boilers

These are the most widely used equipment in winter and for qualifying ENERGY STAR-rated furnaces and boilers having an AFUE rating of 95% or higher, a tax credit of 30% of the cost is given with a capping of $150.

Important Things to Consider

If you want to avail the tax credit and rebate, here are a few things you must consider before applying:

• Credit Limits: There is an overall annual limit of $3200 for all energy-efficient home improvement tax credits combined. For instance, you can claim full credit for an AC or heat pump. But the credit for a furnace or boiler might be reduced once you’ve maxed out the credit via other qualifying equipment.
• ENERGY STAR Certification: Keep in mind the equipment you are upgrading to is ENERGY STAR certified to qualify for tax credit. It is a joint program of the EPA and the US Department of Energy aimed to help consumers to identify the right products that are actually energy-efficient. You can simply look for the ENERGY STAR logo on the equipment before buying one.
• Tax Filing: Finally, you will have to claim the tax credit on your federal income tax return through IRS Form 5695.

Additional State and Local Rebates

Your savings don’t just stop here. In addition to federal tax credits, there are many other states and local municipalities that also offer their own rebates and discounts for installing energy-efficient HVAC Systems. These rebates and incentives can vary depending on location and it is advised you must check the same through your local authorities. Here are a few resources you can go through to find out the best programs in your locality in the US:

• Database of State Incentives for Renewables & Efficiency (DSIRE)
• ENERGY STAR Rebates Finder

Advantages of Energy-Efficient HVAC Systems

Though energy-efficient HVAC Systems offer huge tax credits and rebates that are helpful to minimize the initial upfront cost of the HVAC system, the real advantage comes with the long-term energy savings you can get with these energy-efficient HVAC equipment.

According to the Department of Energy, if you have a high-efficiency AC, then it will use up to 60% less energy than the standard models. This means it can lead to up to 60% savings on your monthly energy bills. Not just that, a well-maintained and efficient HVAC system also provides maximum comfort and reduces repair costs over the long run.

Maximize your savings with Everest Mechanicals

Installing a new HVAC system requires high investment. Therefore it is very important that you choose a qualified and reputed HVAC contractor like Everest Mechanical to ensure that the job is done correctly. 

We have highly experienced trained and certified technicians who will assess your home’s needs and recommend the perfect system for your home to optimize comfort and efficiency. We, at Everest Mechanical, work to ensure you select the right ENERGY STAR-certified model to qualify for valuable federal tax credits and rebates.

Not only that, we will also guide you through the rebate application process and handle the required paperwork. We ensure that you receive every dollar claimed. And not to mention, we provide warrantied installation and HVAC repair service so that you enjoy your new AC or furnace with complete peace of mind without worrying about any faults and errors.

We provide HVAC services across the Colorado state including Denver, Estes Park, Boulder, Fort Collins, Arvada, Longmont and nearby regions. So, if you are planning to install a new energy efficient HVAC system and also want to avail of tax credits and available rebates, then contact us for a free consultation now.