In an effort to encourage energy efficiency and reduce the carbon footprint of households across the country, the federal government provides tax credits for homeowners who install certain energy-efficient heating and cooling systems. The tax credits available in 2023 can provide significant savings for homeowners planning to install or upgrade their HVAC systems.

Listen to the Coop!  Here at Cooper Mechanical, we strive to provide the latest information so our customers can make the best decisions regarding their heating and cooling systems. Let’s take a look at some of the things you can expect in regards to 2023 Federal tax credits.

Is Your New HVAC System Eligible For a Federal Tax Credit Under the Inflation Reduction Act?

Under the Inflation Reduction Act, the 2023 federal tax credits provide incentives for a range of energy-efficient appliances, including specific HVAC equipment such as central air conditioners, heat pumps, and geothermal heat pumps.

An important thing to note is that not all HVAC systems qualify for this tax credit. To be eligible, the systems must meet certain Energy Star requirements. These requirements include specific Seasonal Energy Efficiency Ratio (SEER2) and Energy Efficiency Ratio (EER2) values for air conditioners and heat pumps, and Heating Seasonal Performance Factor (HSPF2), a heating efficiency rating for heat pumps.

Moreover, the energy tax credits apply to primary residences only. This means if you install the energy-efficient HVAC system in rental properties or second homes, you won’t be eligible for the tax credit. Always check with a tax professional or refer to the Internal Revenue Service (IRS) guidelines for detailed tax credit information.

Federal Tax Credit Overview

The exact amount of your tax credit depends on the type of system you install. The credit, including installation costs, can be up to a maximum tax credit of $1,200 for a number of energy-efficient home improvements. For more expensive systems like geothermal heat pumps, the credit could be up to 30% of the total installation cost. Additionally, heat pumps and heat pump water heaters can help you get up to $2,000 for your household if you meet certain income requirements.  We advise that you consult with a tax professional to see if your household can take advantage of this tax credit.

Some of the HVAC systems that are eligible for federal tax credits include central air conditioners, air source heat pumps, and geothermal heat pumps. Specific heat pump models, split systems, and ducted split systems may also qualify.

How Do I Apply for the Tax Credits?

Applying for these tax credits isn’t difficult, but it does require some careful documentation. After your new HVAC system installation, you should receive a Manufacturer’s Certification Statement from the installer or manufacturer. This statement is proof that your system meets the Energy Star guidelines for energy efficiency and is eligible for the tax credit.

When filing your federal income tax return, you will need to complete the relevant forms and submit them along with your Manufacturer’s Certification Statement. It’s important to consult with a tax professional to ensure that you’re accurately claiming your credits. You can also refer to the Internal Revenue Service (IRS) website for more information on the process.

Limitations of the Energy Tax Credits

While the federal tax credits can provide a great incentive for energy efficiency, they do have their limitations. Firstly, these credits are non-refundable, which means they can reduce your tax liability to zero, but you won’t receive a refund for any credit amount exceeding your tax liability.

Secondly, the credits only apply to the principal residence of homeowners. Rental properties, second homes, or new constructions do not qualify. The energy tax credits are also only applicable for systems purchased and installed in the tax year you’re claiming for.


Cooper Mechanical: Helping Families Go Green and Save Money!

At Cooper Mechanical, we’re committed to providing you with the most energy-efficient options to heat and cool your home. We specialize in geothermal heating and cooling and heat pumps that can help you reduce your energy bills and qualify for federal tax credits.

The Coop understands that upgrading your HVAC system is a significant investment, but with the 2023 federal tax credits and the long-term energy savings, it’s an investment that pays off.

Ready to go green and save money? Contact us today to learn more about our energy-efficient HVAC systems and how we can help you maximize your savings with federal tax credits.

Disclaimer: The tax credit information contained in this article is provided for informational purposes only and is not intended as tax or legal advice. Always consult with a tax professional regarding your personal tax situation.

Frequently Asked Questions about 2023 HVAC Federal Tax Credits

Is a New HVAC System Tax Deductible in 2023?

Yes, a new HVAC system could potentially be tax-deductible in 2023 if it meets certain energy efficiency criteria. As per the Inflation Reduction Act, homeowners can avail themselves of a federal tax credit if they install eligible energy-efficient heating and cooling systems, such as central air conditioners, air source heat pumps, and geothermal heat pumps. However, it’s not technically a tax deduction; it’s a tax credit, which is even more beneficial as it reduces your tax liability directly.

What Home Improvements are Tax Deductible in 2023?

In 2023, certain energy-efficient home improvements may qualify for federal tax credits. Improvements such as installing new windows and doors, adding insulation, and installing certain types of energy-efficient HVAC systems can qualify. The exact nature of the home improvements and the energy efficiency achieved determine the value of the tax credit.

What is the Inflation Reduction Act for HVAC in 2023?

The Inflation Reduction Act includes provisions that allow homeowners to claim federal tax credits for installing certain energy-efficient HVAC systems in their primary residence. The aim of the Act is to encourage energy-saving practices among homeowners, contributing to overall efforts in reducing energy consumption and combating climate change.

Will there be any Tax Credits for 2023?

Yes, federal tax credits have been extended for 2023. These include credits for energy-efficient home improvements like the installation of qualified HVAC systems. The credits are part of the federal government’s broader push to promote energy efficiency and environmental sustainability.

Will I Get a Tax Refund Check from the IRS if I Buy a Heat Pump or Air Conditioner that Qualifies?

No, you will not receive a refund check from the IRS if you buy a qualifying heat pump or air conditioner. The energy efficiency tax credits are non-refundable, meaning they will reduce your tax liability but won’t result in a refund check if the credit exceeds your tax liability.

What Other Equipment Qualifies for a Tax Credit?

In addition to heat pumps and air conditioners, other types of HVAC equipment may qualify for federal tax credits. These can include geothermal heat pumps, certain high-efficiency gas, oil, and propane furnaces, and advanced main air circulating fans. It’s important to check specific equipment models against the Energy Star certified systems to confirm their eligibility.

How Do I Claim My Tax Credit?

To claim your tax credit, you’ll need to file the appropriate form with your federal income tax return. You’ll also need to provide a Manufacturer’s Certification Statement, a document proving that your system meets the Energy Star requirements for energy efficiency. A tax professional can guide you through this process to ensure you accurately claim your credits.

What are the Renewable Energy Tax Credits for Geothermal HVAC Systems?

For geothermal HVAC systems, the Renewable Energy Tax Credits provide significant incentives. In 2023, the tax credit is 30% of the cost of the system, including installation. This sizable credit makes the installation of geothermal systems more affordable for homeowners while promoting the use of renewable energy in heating and cooling applications.

What if I purchase HVAC equipment in 2024 or beyond?

As of this writing, the Renewable Tax Credit program runs for 10 years – from 2023 through 2032. After that time, the credit falls to 26% for 2033 and 22% for 2034. The credit will then expire after 2034.  You are eligible to participate once a year.

Disclaimer: The tax credit information contained in these answers is provided for informational purposes only and is not intended as tax or legal advice. Always consult with a tax professional regarding your personal tax situation.