With tax season upon us, here’s a question you may be contemplating right now:
Can federal tax credits actually save you money when it comes to installing HVAC equipment?
The answer to this is:
Yes, but it’s important to understand the details.
As a homeowner, you doubtlessly know how important the words ‘tax credit’ are when tax time comes around every year.
Those handy credits literally take your money back from the IRS, and put it effectively back into your pockets.
The only downside is that they’re a little bit confusing.
But not to worry.
We’re actually pretty well-versed in the tax literature—and we’re here to help you save as much money as possible on your next tax bill.
So buckle-up and let’s take a closer look.
The Energy Efficiency Home Improvement Credit
Under the Inflation Reduction Act of 2022, the Energy Efficiency Home Improvement Credit expanded section 25C tax credits, increasing tax credits for eligible residential equipment up to $2,000.
Now, with that being said, there are some stipulations that go along with that.
Here’s the simple stuff that you need to know as a homeowner.
What Kind Of HVAC Equipment Qualifies For The Tax Credits?
Here’s a list of the most obvious types of equipment that could meet the requirements for the credit:
- High-efficiency water heaters
- Heat pumps
- Central air conditioners
- Building insulation
- Biomass stoves
- Circulating fans (used in qualifying gas stoves)
Roofs and windows would also be covered by the tax credit.
How Much Can The Homeowner Recieve In Tax Credits?
There’s some really good news for 2023 and beyond on this front.
Previously, if you had received tax credits for improvements totaling $500 during an earlier year, you were unable to claim additional credits up to December 31st, 2022.
The good news is that the previous extension ended on December 31st, 2022. And from January 1st, 2023 and onward, the expanded version of 25C will provide up to $2,000 in tax credits for qualifying purchases and improvements.
Plus, this version of the tax credit has an annual limit—not a lifetime limit.
This means that the same homeowner could get the credit for upgrades and qualifying HVAC equipment every year—not just once.
This program is now expanded out to 2032—which is amazing!
That’s another 9 years of $2,000 tax credits to qualifying homeowners.
Are There Any Requirements For The Residence?
One limitation of the credit is that you can’t use it on second homes. According to the literature, in order for your qualifying heating, cooling, or water-heating equipment to be eligible for the credit, the equipment needs to be installed in ‘an existing primary residence that is owned and used by the taxpayer.’
Investment properties, new construction properties, second homes, and even rental properties do not apply.
Yes, you can only get this credit if you actually live in the home.
What Do You Need To Do To Qualify For The Tax Credit?
There are a few steps that you’ll need to take before you’ll be able to claim the credit.
First of all, you should obtain a Manufacturer’s Certification Statement with any new qualifying HVAC equipment you purchase, where the manufacturer certifies that the product or component is, indeed, eligible for the credit.
As a taxpayer, you should keep a copy of this certification statement for your own records (though it’s not necessary to turn it in with your tax return).
Secondly, homeowners need to submit IRS Form 5695, and also meet all other federal tax credit requirements, in order to qualify.
Keep in mind that this credit doesn’t work with new construction or rentals. It only works with your primary residence.
If you need some help with the tax part of this, you may want to consider hiring a tax professional to assist you.
If you need some help installing the types of equipment that could get you this tax credit, feel free to message us here at F&S Master Air. We definitely know a thing or two about installing energy-efficient HVAC equipment, and we also know what types of equipment qualify for the credit—so we can help you out with that part.
There you have it!
Everything you need to know to get started with The Energy Efficient Home Improvement Credit.
Equipped with this information, you may even be able to get your new HVAC unit to pay for itself with the tax credit!
That’s almost like getting a free air conditioner or furnace! So it definitely pays to take a closer look.