What Tax Credits and Incentives for Home Heating and Cooling Are Available in 2023?
The Inflation Reduction Act, passed last summer, created or expanded many federal incentives to help homeowners save money on energy-saving heating and air conditioning upgrades. If you are planning to make improvements this year to the overall efficiency of your home, which includes your heating and cooling systems, you're going to want to know about the savings available to you here in the Finger Lakes!
Inflation Reduction Act Tax Credits
One way to save on the cost of upgrading your home comfort and efficiency is tax credits. There are two existing tax credits which the Inflation Reduction Act has revised that can help homeowners in the Finger Lakes region lower the cost of heat pump installation and other energy-saving home improvements:
25C Tax Credit – Energy Efficiency Home Improvements
This federal tax credit was originally a deduction equal to 10% of energy efficient home improvement costs for the year, but was expanded to 30% as of 2023 and won’t expire until 2032. The 25C tax credit applies to the following:
- Heat pumps and ductless mini-splits and heat pump hot water heaters ($2,000 cap total)
- Energy-efficient HVAC systems including furnaces, boilers, and central AC ($600 cap)
- Insulation and air sealing ($1,200 cap)
- High-efficiency water heaters ($600 cap)
- Electrical panel upgrades ($600 cap)
- Energy-efficient exterior windows and doors ($500 cap for doors, $600 for windows)
- Home energy assessments/audits ($150 cap)
Individual annual tax credit maximums are listed above. Insulation and air sealing upgrades, as well as door and window replacement, will qualify for a credit on the material costs only, not installation costs. You can claim up to a maximum of $1,200 in total combined upgrades every year, except for heat pumps and heat pump hot water heaters, which have their own separate $2,000 annual limit. This means that you can claim as much as a $3,200 tax credit if your home improvements in 2023 include installing a heat pump plus other work like adding new insulation and air sealing.
Federal Solar Tax Credit (Investment Tax Credit)
The solar tax credit works like the 25C tax credit, allowing you to take a federal tax credit equal to 30% of your solar installation and material costs, but this tax credit has no maximum! The credit had originally been set to sunset and expire in just a few years, but instead was increased to 30% and extended to 2035 for residential systems. As of 2023, this tax credit can also include stand-alone solar battery storage systems.
Call Halco to Find Out How Much You Stand to Save with Inflation Reduction Act Incentives
As 2023 progresses, we’ll have more news about IRA incentives, including new forthcoming programs, like HOMES rebates and High-Efficiency Electric Home rebates, that are expected to be rolled out later this year or early in 2024. But the Inflation Reduction Act isn’t the only way to save on energy-efficiency upgrades in your Finger Lakes home. Halco is your one stop shop for all things related to home comfort and energy efficiency, and that includes maximizing incentives! Visit our Financing and Rebates page to learn more about the different programs available in our area, and reach out to our team to learn more about which programs you qualify for.
Looking for more info on how to use rebates and incentives to make your home more efficient, and more comfortable? Call Halco today at 855-533-6976 or contact us online.