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Tax Credits for Qualified ACs, Furnaces, and Heat Pumps

The federal government provides incentives in the form of tax credits as a means of offsetting the costs of making the switch to energy-efficient heating and cooling systems. 

Coming into effect on January 1, 2023, the federal government provides a tax credit to homeowners equal to 30% of the installation costs for products of the highest energy efficiency tier, up to a maximum of $600 for qualified furnaces and air conditioners, and a maximum of $2,000 for qualified heat pumps. 

The Inflation Reduction Act expands on the federal tax credits by introducing extra layers of homeowner efficiency tax rebates under the Energy Efficient Home Improvement Credit. With a cap of $1,200 annually, this covers up to 30% of the installation costs of energy-efficient upgrades to any home. 

Does a New HVAC System Qualify for a Tax Credit in 2023? 

Installing a new HVAC system will net homeowners 10% of the cost of the qualifying equipment, such as insulation, doors, windows, air conditioners, and heat pumps, as a tax credit. This is itemized along with other residential tax credits on IRS form 5695.

A tax refund for installing energy-efficient HVAC systems is a great chance to pay off credit card debts, student loans, or other forms of debt customers might have. Eliminating debt means that you’re more likely to lower interest payments over time, making your HVAC tax credit even more valuable. 

Tax section 25D, relating to a residential energy-efficient property, provides for a tax credit equal to 30% of installation costs for Energy Star geothermal heat pumps for the next decade, reaching all the way into 2032. However, there’s an incentive to get it done sooner rather than later, as the tax credits taper off to 26% in 2033 and then down to 22% in 2034. 

The High-Efficiency Electric Home Rebate Program provides income-dependent rebates for eligible homeowners which include up to $8,000 for all-electric heat pumps, $4,000 for electrical load service centers, $2,500 for electric wiring, and a $14,000 maximum cap for all electric energy-efficient home upgrades. 

Federal, state, and local tax credits and rebates help to ease customers in their transition to electric-centered energy with a focus on efficiency. They also help to stimulate the national economy and get cash into the hands of consumers everywhere. If you’re ready to work with the best HVAC company around to install energy-efficient heating and cooling systems for your home or business, then Magnolia’s ready to get to work. Reach out to us today via phone or email to learn more about the amazing HVAC tax credits available and schedule a free consultation about making the switch to a more energy-efficient life!

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Magnolia Heating and Cooling is a Riverside-based, family-owned business that provides residents within and the surrounding areas with superior HVAC services. If you live in

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