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Save Money on HVAC and Other Improvements with Tax Credits

September 22, 2022
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Summary

Investing money in new HVAC equipment and energy-efficient appliances can make your home more comfortable and save money through efficiency gains. Plus, there are other improvements that will make your home more energy efficient. These improvements can save you money over the long haul, but did you know that there are tax credits available that can help defer some of the cost of these improvements? In this article, we'll examine some of the federal tax credits available for HVAC equipment and energy efficiency improvements to your home.

Contents

What are federal tax credits?

As the name indicates, federal tax credits are not paid directly to you but are credited to you when you submit your federal tax return. They are a dollar-for-dollar reduction in the amount of tax you owe.

For example, a $500 tax credit will take $500 off of your tax bill when you claim the credit.

In many cases, you'll need to submit special tax forms to claim tax credits, on your tax return, so it's smart to consult with your tax professional or check with the IRS for the proper form.

There are several different categories of tax credits. Let's take a look at the categories and the types of equipment or improvements that qualify.

Qualifying equipment purchases

The largest category for a federal tax credit is tax credits for qualifying equipment purchases. In this section, we'll examine what equipment qualifies and look at the role of these pieces of equipment in your home.

Air source heat pumps

Heat pumps are a proven technology that can provide significant energy and cost reductions when used for heating and cooling your home.

Heat pump systems are either "split," meaning that there are indoor and outdoor portions of the system, or a "package," where all of the equipment is located in a single outdoor package.

Through 2022, ENERGY STAR-certified air source heat pumps qualify for $300 federal HVAC tax credits when installed in your primary residence.

Central air conditioning systems

These air conditioning systems are an excellent way to keep your entire home comfortable. They circulate air throughout the home via ducts and returns, and not only cool the air, but lower the humidity inside your home as well.

These air conditioning systems are either "split," meaning that there are indoor and outdoor portions of the system, or a "package," where all of the equipment is located in a single outdoor package.

Through 2022, central air conditioning systems rated ENERGY STAR "Most Efficient" air conditioning systems qualify for a $300 tax credit when installed in your primary residence.

Hot water boilers

You can be forgiven for mixing up "water heater" with "water boiler." But they are two very different things. A hot water boiler is used as part of a steam heating system. Water is heated to boiling by burning natural gas, oil, or propane, when it turns to steam, then is distributed throughout the home to radiators that heat individual rooms.

This federal tax credit is applicable for gas, propane, or oil water boilers, so if your boiler uses any of these fuel sources it may qualify.

Through 2022, water boilers rated ENERGY STAR "Most Efficient" qualify for a $150 tax credit when installed in your primary residence.

Furnaces

Unlike boilers, which are used to circulate steam or hot water for heat, furnaces heat air that is circulated throughout the home via ducts. Modern furnaces with high-efficiency ratings can help you save significant amounts on your home energy bill.

This federal tax credit is applicable for qualified natural gas, propane, or oil furnaces, so if your furnace uses these fuel sources it may qualify.

Through 2022, furnaces that are ENERGY STAR certified qualify for a $150 tax credit. This credit does not apply in states in the US south.

Water heaters

As we discussed earlier, water boilers are used as part of steam heating systems. Water heaters, however, are used to provide hot water for domestic use - laundry, dishwashers, showering, and so on. Water heaters typically account for about 12% of residential energy consumption in a typical home, so an energy-efficient water heater is a smart way to improve your home's energy efficiency.

This federal tax credit can be applied for after purchasing gas or electric home water heaters. It does not cover solar water heaters.

Through 2022, most electric or gas water heaters that are ENERGY STAR certified qualify for a $300 tax credit.

Tankless Water heater installation

Advanced main air circulating fan

An advanced main air circulating fan is an efficient blower motor or fan that circulates the air your furnace heats throughout your home's duct system. These fans or motors are built into the components of your HVAC system.

Through 2022, advanced main air circulating fans that consume less than 2% of the furnace's project energy consumption qualify for a $50 tax credit.

Important qualifications

It's important to know whether your equipment upgrades are qualified energy efficiency improvements. Some of the factors to check on can include whether the upgrade qualifies are whether or not it is installed in your primary residence, whether the equipment meets SEER (Seasonal Energy Efficiency Ratio) or ENERGY STAR certifications, and more.

All the energy tax credit figures given are based on legislation for the year 2022, as set by the Consolidated Appropriations Act. Tax credit amounts for future years will depend upon specific acts of legislation and will be updated in 2023.

This information from the energystar.gov website can help you check to be sure your new equipment qualifies. Check with your contractor if there is any question about whether the equipment qualifies, and ask for the Manufacturer's Certification Statement to be sure.

Energy-efficient home improvements

Purchasing energy-efficient HVAC and other equipment is one way to improve the efficiency of your home and lower energy costs. Another way is to make energy-saving improvements to your home. And there are federal tax credits available to help you offset the cost of these improvements.

In this section, we'll examine tax credits for energy-efficient home improvements.

Insulation

Insulation is one of the most cost-effective ways to reduce the energy needs of your home. Older homes can benefit greatly from the addition of insulation in the attic and walls. Another smart way to insulate your home is by sealing air leaks around windows or doors.

The federal tax credit for insulation covers both bulk insulation products and products designed to stop air leaks.

Bulk insulation can include roll insulation, insulation batts, rigid insulation boards, spray foam insulation, blow-in insulation, and more.

Air seal products can include house wrap, caulk, spray foam, and weather stripping.

It's important to note that the cost of installation of these products is not included when applying for tax credits.

Through 2022, 10% of the cost of insulation products, up to $500, can be applied as a tax credit.

Roofs

To improve your home's energy efficiency and keep it cooler, improving the roof with a new metal or asphalt roof with pigmented coatings or cooling granules can make a significant difference in how hot your roof gets.

It's important to note that the cost of installation of a new roof is not included when applying for tax credits.

Through 2022, 10% of the cost of a qualifying roof, up to $500, can be applied for as a tax credit.

Windows, doors, and skylights

If you have an older home, new windows, doors, and skylights can reduce energy costs and improve energy efficiency.

ENERGY STAR-certified doors, skylights, and windows qualify for tax credits. Installation costs are not included. You don't have to replace all the windows to qualify, and windows in new construction (like an addition) qualify as well.

Through 2022, 10% of the cost of a qualifying roof, up to $500, can be applied for as a tax credit. Tax credits for new windows are capped at $200.

Renewable energy tax credits

There are a number of tax credits available for renewable energy products. These include:

  • Geothermal heat pumps
  • Residential wind turbines
  • Solar energy systems
  • Fuel cell equipment
  • Biomass fuel stoves

Team Enoch can help

When you're buying new heating or cooling equipment, or having home improvements made, you need a partner you can trust to work with you. If you're in the Dallas/Fort Worth area, your best partner is Team Enoch.

Team Enoch is committed to providing high-quality products and workmanship to our customers, at a fair price. With over 2500 positive reviews, and over 10,000 jobs completed every year, we pride ourselves on ensuring that our well-trained technicians do the job right the first time.

At Team Enoch we have extensive experience in installing a wide range of HVAC heating and cooling equipment. And we also have plenty of experience in installing new roofs, windows, and more.

If you're in the Dallas Fort Worth area and are ready to improve your home's energy efficiency (and earn tax credits) Team Enoch has the expertise to help your out. Contact us for all your home needs. Remember, estimates are always free!

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