WHAT IS THE INFLATION REDUCTION ACT OF 2022?

 

The Inflation Reduction Act of 2022 includes incentives that reward homeowners for installing high-efficiency HVAC equipment

The U.S. Government has passed the Inflation Reduction Act of 2022, a piece of legislation covering a broad spectrum of initiatives, including health care costs, clean energy, and the federal deficit among others. Of particular interest to homeowners, home builders and HVAC contractors, this act includes a number of incentives for the installation of high-efficiency home heating and cooling products.

HOW DOES THIS LEGISLATION AFFECT HOMEOWNERS?

For homeowners, this legislation makes stepping up to a higher efficiency home comfort system more affordable. And when they do, it can lead to higher satisfaction with Carrier systems that provide the additional comfort benefits of our premium products, including: • Potentially reduced monthly heating and cooling costs with highest efficiency models • Infinity® system communicating capabilities • Greenspeed intelligence with adaptable capacity comfort • Ideal Humidity SystemTM technology's advanced moisture control • Smooth, even variable-speed comfort

THE REALITY ABOUT THE REBATES

• While the $4.3 billion rebate budget certainly catches your eye, it's best to be patient and attentive to details for now. Here's why:
• $4.3 billion in state-administered rebates on ENERGY STAR® certified equipment
• Extension and expansion of 25C, 25D, and 45L tax credits for CEE Highest Efficiency and ENERGY STAR® certified equipment
• Funds will be allocated to state energy offices with a fair amount of discretion on how they will be used.
• Depending upon the state, rebate programs may take some time to get implemented.
• Funding allocations will vary from state-to-state.
• The rebate program will not be available to all households. Households earning less than 80% of the median income can qualify for the full benefit. Those earning between 80 - 150% of the average median may be eligible for a partial (50%) benefit.
• Rebates will be subject to availability - the funds are capped, so they may run out before the ten-year period is over.

Tax Credits Homeowners Can Claim

25D - Residential Energy Efficient Property

Projects in Place 2022-2032 - 30% credit Projects in Place through 2033 - 26% credit Projects in Place through 2034 - 22% credit

25C - Non-Business Energy Property Credit

The amended Energy Efficient Home Improvement Credit (25C) begins in 2023 and extends through 2032. It increases the tax credit limits for high-efficiency equipment as follows:

Eligible equipment includes: Heat pumps and heat pump water heaters, Energy-efficient HVAC systems (including furnaces, boilers, and central AC)
The 25C credit has an annual cap of $1,200 (except heat pump):

• Up to $600 each for a qualified air conditioner or gas furnace, with an annual cap of $1,200
• Up to $2,000 with a qualified heat pump, heat pump water heater, or boiler
• There are no income requirements for this tax credit, and it cannot be combined with other federal programs.

45L - Energy Efficient Home and Multifamily Credit

The U.S. government appropriated $4.5B of funds for the High-Efficiency Electric Home Rebate Program (HEEHRP) and will distribute the funds to state energy offices to administer the rebate program.

HEEHRP provides HVAC rebates up to $14,000 per household, including:

• Up to $8,000 for installing Energy Star® qualified heat pumps
• Up to $4,000 for electrical panel upgrades
• Up to $1,600 for home insulation and sealing
• Up to $2,500 for home electrical wiring improvements

Eligibility and the amount of the rebate depends on household income:

• For households below 80% of area median income, 100% of the system purchase price qualifies for the rebate.
• For households that fall within 80% to 150% of area median income, 50% of the system purchase price qualifies for the rebate.
• Households above 150% of area median income do not qualify for the HEEHRP rebate.
  The duration of the program will depend on the funds available within each state and the number of rebates distributed.

Which Equipment Is Eligible for a 2023 Tax Credit

25D - Residential Energy Efficient Property

30% of cost up to $1,200 ($2,000 for Heat Pump) Products must be in the highest efficiency CEE tier

Air Conditioners- Up to $600 tax credit

Heat Pumps- Up to $2,000 tax credit

Gas Furnaces and Boilers- Up to $600 tax credit

Advanced Main Air Circulating Fan- Must use no more than 2% of furnace's total energy, up to $50 tax credit

25C - Non-Business Energy Property Credit

Geothermal Heat Pumps

• 30% for systems placed in service during calendar year 2022 through calendar year 2032
• 26% for systems placed in service during calendar year 2033
• 22% for systems placed in service during calendar year 2034

45L - Energy Efficient Home and Multifamily Credit

Single Family

• Single Family New homes - $2,500 tax credit
• Zero-energy Single Family New Homes - $5,000 tax credit

Multifamily

• Multifamily Units - $500 tax credit
• Zero-energy Multifamily Units
• $1,000 tax credit