Exploring HVAC Tax Rebates and Incentives for 2024

Jan 29, 2024 | HVAC System

HVAC 2024 presents an excellent opportunity for homeowners considering HVAC home improvement projects. The Inflation Reduction Act (IRA) has paved the way for enticing incentives. Recently, the US Department of Energy initiated the application process, enabling states to access funds designated for the IRA. The goal is to create state rebates for individuals investing in energy-efficient home improvements, aligning with the current administration’s Investing in America agenda.

These rebates are designed to motivate homeowners to pursue energy-efficient upgrades by making them more affordable. The concept is simple: accessible upgrades lead to reduced home energy costs while contributing to a sustainable future.

In 2023, homeowners could benefit from two federal tax credits: the federal solar tax credit and the state tax credit. The federal solar tax credit covered up to 30% of solar improvement costs. Depending on their location, homeowners may have also been eligible for additional state-level tax credits. By integrating solar energy with certain Knoxville HVAC improvements, homeowners could enhance heating and water efficiency. In 2024, as new state rebates emerge, the advantages of IRA incentives will expand further.

Topics Covered in This Article

HVAC Tips: Understanding the Energy-Efficient Home Improvement Credit

Formerly known as the Nonbusiness Energy Property credit, the energy-efficient home improvement credit aims to offset the expenses of energy-efficient upgrades, with the ultimate goal of reducing overall energy consumption. HVAC appliances typically account for a significant portion of a home’s energy consumption. It’s important to note that this credit applies exclusively to existing homes, not new constructions.

Changes to the Energy-Efficient Home Improvement Credit

One notable change is the removal of the lifetime cap on rebate values. Starting in 2023, homeowners can make qualifying improvements annually until 2032, with an annual cap of $3,200. This means that homeowners can enjoy the benefits multiple times without being restricted by a lifetime limit. The specific rebate amount depends on the improvements made and the year of implementation.

For instance, improvements made between 2005 and 2022 had a lifetime limit of $500. However, for improvements carried out between 2023 and 2032, an annual limit of $1,200 applies, with an additional $2,000 available each year for select improvements like heat pumps, heat pump water heaters, biomass boilers, and biomass stoves, resulting in a $3,200 total limit.

Knoxville Heating Qualifying for the Credits

To be eligible for these credits, HVAC improvements must align with the government’s energy-efficient requirements. Tax or HVAC contractors in Knoxville TN can provide guidance on which improvements qualify.

Credits for Different Home Improvements and Amounts

Energy-Efficient Home Improvement Credit Amounts and Requirements

Biomass stoves and boilers, central AC, heat pumps, and heat pump water heaters now offer a 30% incentive, covering costs, including labor up to $2,000, promoting energy-efficient upgrades.

Home energy audits are now eligible for a 30% reimbursement of costs, up to $150, provided the audit includes a home inspection by a certified auditor followed by a written report.

Provided they satisfy certain standards, insulation improvements can receive a 30% reimbursement of costs, up to $1,200.

Natural gas, propane, or oil water boilers and water heaters that meet the efficiency standards will qualify for a $300 incentive, covering 30% of costs, which includes labor up to $600.

Electric panels with a load capacity of at least 200 amps, installed in accordance with the National Electric Code, are eligible for a 30% reimbursement of costs, including labor of as much as $600.

Clean Energy Credit Amounts and The Requirements

Geothermal heat pumps and solar systems, including panels and water heating components, each qualify for a 30% tax credit encompassing costs, including labor, provided they meet specific requirements.

How to Claim IRA Tax Credits

Projects are considered for the tax year in which they’re completed. It’s crucial to maintain records such as product receipts and manufacturer certifications to verify energy-efficiency compliance. Although these documents aren’t mandatory for filing, they are essential for potential audits.

Additionally, the IRA legislation introduces two rebate programs: the Home Energy Performance Based, Whole House Rebate (HOMES) and the High-Efficiency Electric Home Rebate, managed by state energy offices. While participation becomes possible in late 2023 or early 2024, planning is crucial. Both rebate programs offer point-of-sale discounts, with varying financial benefits based on factors such as household income, upgrade specifics, and state regulations.

Special Incentives for Low and Medium-Income Households

The High-Efficiency Electric Home Rebate targets low- and medium-income households, motivating them to enhance energy efficiency through specific upgrade incentives. Eligibility depends on income thresholds, with households below 150% of an area’s median income qualifying. Households within the 80% to 150% income range can receive up to 50% coverage for qualified electrification projects, with a maximum cap of $14,000. Households below the 80% threshold can benefit from up to 100% coverage for their qualified electrification projects.

The rebate outlines maximum amounts for various qualified upgrades, encouraging energy-efficient home improvements while helping households reduce utility expenses.

Make the Most of HVAC Tax Rebates and Incentives

2024 presents an exciting opportunity for homeowners to pursue energy-efficient home improvements. The IRA’s incentives and rebates aim to make such upgrades accessible and affordable, contributing to reduced energy consumption and a more sustainable future. Whether you’re considering HVAC enhancements, solar installations, or other energy-efficient projects, exploring these tax credits and rebates can lead to substantial financial benefits.

Interested in taking advantage of HVAC tax rebates and incentives for your home improvement projects? Contact J.C.’s Heating and Air for expert guidance and assistance in making your home more energy-efficient.