Does Your HVAC System Qualify for a Tax Credit?

Most forced-air systems have an average lifespan of 10 to 15 years with proper care. Ductless and hybrid systems both usually last 15 to 20 years. There are many other HVAC systems with varying life expectancies. But the truth of the matter is, all HVAC systems eventually wear out and break down. When this happens, understanding different HVAC tax credits and what systems they apply to can make a replacement much more affordable.

Geothermal Heat Pumps

Among today’s many heating and cooling solutions, geothermal heat pumps rank among the most efficient options available. These systems exchange heat between your home and the Earth to maintain ideal temperatures. Many of them are eligible for the Residential Energy Efficient Property Credit under Section 25D. To qualify for this tax credit, the geothermal heat pump you install must meet specific efficiency standards. The credit generally covers a portion of the installation and labor costs.

The Inflation Reduction Act of 2022 allows solar and geothermal heat pump systems installed starting in 2022 to receive a 30% tax credit. Fuel cells receive credits based on a fixed amount for each kilowatt of capacity.

You need to review specific regulations and restrictions because eligibility criteria change based on the system type and installation date. The tax credit is available only for equipment installed at either the taxpayer’s primary residence or their secondary residence.

Air Source Heat Pumps

Air source heat pumps present a cost-saving option for homeowners who need moderate heating and cooling during all seasons. The core principle of these systems is to move heat from the outside environment into the indoor space and vice versa. For example, they send heat from outdoor air inside the home in winter to provide indoor heating. During summer months, they operate in reverse to remove indoor heat, which results in cooling the home. To be eligible for the Nonbusiness Energy Property Credit (Section 25C), your air-source heat pump must meet particular efficiency criteria, including ENERGY STAR certification.

Central Air Conditioning Units

The Nonbusiness Energy Property Credit under Section 25C covers high-efficiency central air conditioning systems with SEER ratings exceeding the standard minimum requirement. Packaged systems usually need to meet a minimum SEER rating of 15.2 SEER2.

Ductless Mini-Split Systems

Much like central AC, ductless units can qualify for a tax credit via the Nonbusiness Energy Property Credit under Section 25C. The minimum SEER rating requirement for mini-split units depends on both geographic location and the particular equipment used.

Hybrid Heating Systems

A hybrid heating system is one that combines a heat pump with a furnace. The systems automatically switch on and off depending on the outside temperature. When it’s a mild temperature outside, the heat pump will stay on. When it gets cold, the furnace kicks on to provide additional warmth. This type of heating keeps heating bills to a minimum and helps the equipment last longer. Qualifying systems for tax credits often include furnaces with an Annual Fuel Utilization Efficiency (AFUE) rating of 95% or higher. The heat pump will need to meet the Heating Seasonal Performance Factor (HSPF) standard of 8.5 or higher to qualify.

Energy-Efficient Furnaces

Even if you don’t have a hybrid heating system, your furnace might still qualify for a tax credit. It will need to have ENERGY STAR certification and an AFUE rating of 95% or higher. Keep in mind that qualifications for the Nonbusiness Energy Property Credit under Section 25C may differ depending on location.

High-Efficiency Boilers

A lot of older homes with radiators or baseboard heaters use a boiler to produce heat. Boiler systems use less fuel and energy to provide the same level of comfort when compared to forced-air systems. Plus, they require minimal maintenance. If you decide to install a boiler, you might qualify for a tax credit under Section 25C of the IRS tax code. You’ll need to check if any special criteria apply to the credit for your location.

Solar Heating Systems

Solar HVAC systems use solar energy to provide heating and cooling functions. Despite their high efficiency and ability to save a lot of money, they come with substantial installation costs. The Residential Energy Efficient Property Credit under Section 25D helps homeowners reduce installation expenses for solar panels to increase affordability.

Air Choice Heating & Cooling is here to answer any questions you may have about qualifying for HVAC tax credits. We can inspect your home to see which credits will provide the biggest savings. We also offer heating and AC installations, repairs and maintenance to make your energy expenses more affordable.

Call Air Choice Heating & Cooling today to learn more about HVAC tax credits in Carol Stream, IL.