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How to Use the Energy-Efficient Home Improvement Credit

Smiling technician installing energy-efficient HVAC system that qualifies for federal tax credit

Like many homeowners, you may be interested in reducing your carbon footprint by making eco-friendly upgrades to your home, especially when it comes time to replace your heating and cooling system. In addition to feeling good about doing your part to help prevent further climate change, you can also save money in the process.

With a goal to slow the progression of global warming by reducing greenhouse gas emissions by 40% by 2030, the U.S. government enacted the Inflation Reduction Act of 2022 (IRA). The IRA includes tax breaks such as the Energy Efficient Home Improvement Credit (25C) Program, which provides a financial incentive for homeowners to increase the energy efficiency of their principal residence by purchasing certain “green” appliances, such as heat pumps and HVAC systems.

How Much Can You Save?

For qualified energy-efficient equipment installed on January 1, 2023, through December 31, 2032, a homeowner can benefit from a federal tax credit of up to $3,200 annually, including:

  • A tax credit of 30% of the total price paid for an eligible heat pump, including labor, up to $2,000
  • A tax credit of 30% of the total price paid for an eligible air conditioner or gas furnace, up to $600 each with an annual cap of $1,200

To be eligible for the Energy Efficient Home Improvement Credit, the equipment must meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency (CEE) that is in effect as of the beginning of the year in which the equipment is placed in service.

There are no income requirements for the tax credit, which is typically applied to a taxpayer’s federal income tax liability. A large enough tax credit can potentially reduce the taxpayer’s tax liability to zero (any excess credit amount will not be refunded).

It’s a Great Time to “Go Green”

By taking advantage of the Energy Efficient Home Improvement Credit, you can not only offset the upfront costs associated with making eco-friendly improvements to your home but also potentially reduce your monthly energy bills for years to come. If you have questions, contact Premier HVAC Mechanical Corporation. We are a second-generation family business with more than 35 years of experience in meeting the heating and cooling needs of homeowners in the Atlanta, Georgia, area.

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