Due to the Inflation Reduction Act of 2022, residents of Phoenix, AZ, can cut their costs when installing new qualifying HVAC equipment. With up to $2,000 available as tax credits, you can significantly offset your upfront spending on a new heating and cooling system at year’s end. However, the key to maximizing these savings lies in choosing the right HVAC replacement equipment. Read on to learn about qualifying for these impressive, federal tax incentives.
Introducing the Inflation Reduction Act
With the two-pronged goal of inflation reduction and deficit control, the Inflation Reduction Act of 2022 lowers the prices of various prescription drugs, supports domestic energy production, and rewards the use of clean energy. For homeowners, it provides several hearty tax incentives for installing high-efficiency HVAC equipment. This includes heat pumps and high-efficiency furnaces.
What Is a Tax Credit?
Although federal tax incentives for efficient home heating and cooling systems will not impact your upfront costs for new HVAC equipment, they will offset your spending at the end of the year. With available tax credits as high as $2,000, you can entirely offset tax debts of an equal amount. For instance, if you owe $2,000 in taxes before taking the maximum tax credit, you’ll owe nothing once the related deductions have been factored in. If you owe less than $2,000 before taking this credit, you may even get a tax return.
The Duration of Tax Credits Offered Under the Inflation Act
Tax credits for HVAC equipment installations and upgrades are applicable to all qualifying products set up and ready for service between January 1, 2023, and December 31, 2032. These credits include up to $600 for qualifying propane and natural gas furnaces and up to $2,000 for qualifying heat pumps. There is also the opportunity to retroactively claim these benefits if you installed new qualifying equipment between January 1, 2022, and December 31, 2022. In both cases, you can claim up to 30% of your installation costs up to a maximum of $2,000.
Yearly Limits on Efficiency Tax Credits
Between 2023 and 2032, there is also no limit on how many times you can use this credit for applicable efficiency upgrades. Thus, if you replace your heat pump or furnace today, and then decide that you want to replace your water heater several years down the road, you can claim this tax credit again. The only limitation is that you cannot exceed $3,200 in efficiency tax credits in any single year. Although $2,000 is the limit for heater or heat pump replacements, you can also take advantage of up to $1,200 in additional home envelope improvements by upgrading your windows, adding insulation, or taking other like measures.
Heaters That Meet the Requirements for Efficiency Tax Credits
Available efficiency tax credits for new equipment installation or upgrade of home HVAC equipment are only applicable to models that meet or exceed the highest efficiency tier. All applicable models have the Energy Star rating, but they should additionally boast the right Seasonal Energy Efficiency Ratio 2 (SEER2) ratings. In Arizona, split system heat pumps must have a minimum SEER rating of 15 or a SEER2 rating of 14.3. They must additionally have a heating seasonal performance factor (HSPF) rating of 8.8 or an HSPF2 rating of 7.5. The standards for single packaged units include a minimum SEER of 14 or a minimum SEER2 of 13.4. HSPF and HSPF2 requirements for single package units are 8.0 and 6.7 respectively.
How to Claim Efficiency Tax Credits
You can claim tax credits for efficiency upgrades made to your current home heating and cooling system by submitting Form 5695 when filing your taxes. When installing your furnace or heat pump, we can make sure that your new HVAC system meets the requirements for all applicable credits. We will also provide the supporting documentation that you might need when filing or undergoing an audit such as detailed receipts, model descriptions, and user manuals. Speak with a tax professional for more information.
Save Money in 2023
At Brisk Air, we work hard to help residents of Phoenix save cash and lower their carbon footprints. We offer air conditioner and heater installation, maintenance, and repair services. You can count on us to help you find replacement heating equipment that will qualify you for maximum tax credits. Call Brisk Air today to get started!