Have you been planning to upgrade your HVAC equipment? Great news—the Inflation Reduction Act of 2022, which was signed into law in August, may be able to help you save some money.
Investing $369 billion into the Inflation Reduction Act (IRA) is the largest federal legislation designed to include significant rebates and tax credits for homeowners who install new energy-efficient furnaces, air conditioners, heat pumps, boilers, and water heaters. Here’s a breakdown of each of these incentives.
The 25C Energy Efficiency Home Improvement Tax Credit
Although this tax credit has been available for a while, the IRA increased the value of the tax credit by 20%. Instead of being limited to 10% of your project costs, it’s now up to 30%—and it’s now possible to receive a benefit each year.
The tax credit, which can only be used to offset tax liability, has an annual cap of $1,200, including:
- Up to $600 for a qualified air conditioner or gas furnace
- Up to $2,000 for gas and electric heat pumps, heat pump water heaters, and boilers
This incentive goes into effect in 2023, and if you’re eligible, can be claimed when you file taxes in 2024. There are no income requirements and it can’t be combined with other federal programs such as HEEHR or HOMES. However, the tax credit may be able to be combined with local or utility rebates. Homeowners who had eligible equipment installed on or after January 1, 2022, may also be eligible for retroactive tax credits under this program.
The High-Efficiency Electric Home Rebate (HEEHR) Program
This new $4.275 billion program covers 100% of electrification project costs for low-income households and up to 50% of project costs for moderate-income households—up to $14,000 for both income groups. Qualifying projects and maximum rebate values include:
- $8,000 for electric heat pumps
- $4,000 for an electric panel upgrade
- $2,500 for electric wiring
- $1750 for an electric heat pump water heater
- $1,600 for home insulation
Project costs include both purchase costs and installation costs; rebates are given as point-of-sale discounts.
The HOMES Rebate Program
Unlike the HEEHR program, the all-new $4.3 billion Home Energy Performance-Based Whole-House (HOMES) rebate program isn’t restricted by income levels; instead, they’re based on the performance of energy efficiency and electrification improvements installed in your home. For example, homeowners who install energy-efficient appliances that allow them to cut their energy usage by at least 35% can get up to $4,000 in rebates—and that amount is doubled for low- and middle-income households.
It’s important to know that you can’t participate in both the HEEHR and HOMES programs, so you’ll need to decide which program is right for your project. If you would like help deciding which program would be best, we’re always happy to help!
Should You Get Home Upgrades Now or Wait Until 2023?
Although these incentives can provide significant savings, there are several reasons why you may not want to wait until 2023 if you’ve been considering upgrading your home:
- The current state and utility rebates you qualify for now may not be around in 2023—and depending on your income, the federal rebates may not be as much of an incentive. It’s not clear at this point how the federal rebates will work with existing state and utility programs; it’s possible the federal rebates will result in lower local rebates.
- Inflation will likely continue (and possibly worsen) in 2023; the rise in equipment prices may offset some of the savings you would receive from the rebate programs.
- Energy costs are rising, especially the cost of natural gas—and although costs are expected to stabilize, reducing your home’s energy use today is an excellent way to mitigate uncertainty about energy prices in the future.
- Due to the rebate programs, there will be a higher demand for work for HVAC contractors in the future, which could delay your project. Getting ahead of the demand will ensure you have your new equipment installed in a timely manner.
In addition, you deserve comfort! If your existing equipment isn’t keeping your home comfortable, it’s not worth putting off the work for potential savings.
Contact PECO to Learn More
Regardless of when you’d like to upgrade your home, PECO Heating & Cooling is here to help! We’re happy to work with you to find the best upgrades and rebate programs to help you save money and improve your home’s energy efficiency.
If you’re interested in the 25C tax credit, all Dave Lennox Signature Collection products in the Ultimate Comfort System qualify; Lennox also offers an assortment of ENERGY STAR-certified products that are eligible for the rebate program, including the most efficient heat pump (SL25XPV), air conditioner (SL28XCV), and furnace (SLP99V) on the market. For more information on the IRA incentives contact your accountant or to schedule an installation, contact PECO today at 864-639-2424.