As a homeowner, you know that maintaining the comfort and functionality of your home is essential. While new HVAC and plumbing systems can be costly, did you know that there are tax credits and rebates available to help offset those expenses?
There is a lot of attention lately on the Inflation Reduction Act of 2022, which has tax incentives in it that can reduce the energy costs and financial impact of home improvements like HVAC systems or water heaters. We’ll provide an overview of the HVAC and plumbing tax incentives available to homeowners and the specific improvements that qualify. We’ll also discuss how you can claim these credits on your income taxes.
If you're a Columbus, OH area homeowner looking to replace or upgrade your HVAC system or water heater, you may be eligible for a tax credit. The Inflation Reduction Act of 2022, often referred to as the 25C tax credit, offers tax credits for installing high efficiency HVAC and water heating equipment including air conditioners, oil and gas furnaces, ducted or ductless heat pumps, geothermal heat pumps, heat pump water heaters, and tankless high-efficiency water heaters. By taking advantage of these tax credits, you can offset some of the costs associated with home comfort improvements that are more energy-efficient.
If you are looking to invest in your home's heating and cooling system while saving some dollars on your taxes, it's essential to understand how these new tax credits work. Note that the credit only applies to specific models that meet Environmental Protection Agency (EPA) and ENERGY STAR energy-efficiency standards, so it's crucial to do your research before making a purchase.
The Inflation Reduction Act of 2022 allows a credit of 30% of project costs up to a maximum of $600 for homeowners who install new, energy-efficient central air conditioners.
Installing a qualified heat pump has a tax credit of 30% of the cost of heat pump installation, up to a maximum tax credit of $2,000. Ducted and non ducted heat pump systems may qualify.
Installing a new gas furnace or oil furnace can qualify you to receive a federal tax credit of 30% of installation costs up to a maximum of $600.
Installing a new gas boiler or oil boiler can qualify you to receive a federal tax credit of 30% of installation costs up to a maximum of $600.
Another tax credit available to homeowners is for installing a new gas tank water heater or gas tankless water heater. You can receive a tax credit equal to 30% of the installation cost up to a maximum credit of $600 for installing a water heater that meets specific energy-efficient requirements. These include both electric and gas heaters and must be installed by a qualified professional.
Installing a heat pump water heater comes with greater homeowner benefits. The energy efficient home tax credit is 30% of installation cost up to $2,000 when you install these highest efficiency systems.
Finally, if you’re interested in renewable energy sources, you may qualify for a tax credit for installing a geothermal heat pump. These systems use the constant temperature of the earth as a source of energy. If you install a geothermal heat pump, you can receive 30% of the total cost in tax credits.
In addition to federal tax credits, there are several HVAC and plumbing energy rebate options available for homeowners in Columbus. For example, AEP Ohio offers rebates for energy-efficient HVAC equipment, insulation, and lighting. Check out the programs below to see more ways you can save:
Investing in energy-efficient upgrades can not only help you save money on energy bills, but it can also earn you some pretty substantial tax incentives. In this section, we’ll explore additional home energy tax incentives that you may qualify for, so you can take full advantage of the benefits of an energy-efficient home.
Upgrading your electrical panel not only improves safety and reliability, but it can also help you capitalize on federal tax incentives. In fact, the government offers incentives up to 30% of equipment and installation costs up to $600 for upgrading to energy-efficient electrical systems.
Insulation is one of the most effective ways to keep your home warm in the winter and cool in the summer. It also helps to reduce energy waste, which translates into big savings on your energy bill. Installing new insulation can qualify you to receive a tax credit equal to 30% of the project cost, up to $1,200.
Solar panels have become increasingly popular over the years and for a good reason. By harnessing the power of the sun, they generate clean, renewable energy that can significantly reduce your energy costs. The tax credit for installation is 30% for systems placed in service after December 31, 2021, and before January 1, 2033
Replacing old, drafty windows and doors with energy-efficient ones can help you save up to 10% on your energy bills. You can claim up to 30% of the purchase cost of qualified windows, up to $600, as a tax incentive. Installing qualifying exterior doors can earn you a tax credit equaling 30% of your project costs up to $250 per door, with an annual maximum of $500.
A home energy audit is an inspection of your home's energy consumption that can help identify areas where you can make improvements. A professional auditor will analyze everything from your insulation, HVAC system and lighting to your appliances and electronics, and provide you with a detailed report on energy-saving upgrades you can make. Moreover, tax incentives for having a professional energy audit are available as well, 30% of your total costs up to $150.
Qualifying for HVAC and plumbing tax incentives is relatively straightforward. To qualify, you must ensure that your new system meets specific energy efficiency requirements and was installed by a licensed contractor. Once the installation is complete, you can claim your tax credits on your income tax return. Be sure to keep all paperwork, invoices, and receipts related to the installation to claim the credit successfully.
If you are considering making energy-efficient improvements to your home, it is worth understanding the annual limits on energy-efficient home improvement tax credits. These limits not only restrict the amount of credit you can claim for a particular installation, but there are also overall aggregate limits that apply annually.
We’re going to get into some math here, so bare with us!
The current overall total limit for an efficiency tax credit in one year is $3,200. This means that if you are looking to make a few different energy-efficient upgrades to your home in one year, you should keep in mind the limits on the total amount of tax credits you can receive.
The annual total limit for any combination of home envelope improvements (such as windows, doors, skylights, insulation, and electrical work) plus furnaces, boilers, and central air conditioners is $1,200. This means that all of these upgrades combined cannot exceed the limit of $1,200 to be eligible for the tax credit.
Similarly, any combination of heat pumps, heat pump water heaters, and biomass stoves/boilers are subject to an annual total limit of $2,000. This means that if you are going to install any of these upgrades in your home, the total tax credit you can receive should not exceed $2,000.
HVAC and plumbing tax incentives can provide an excellent way to offset the cost of new system installations or improvements to your home. From Columbus furnace installation and air conditioning replacement tax credits to water heater incentives, there are many ways to save money while also improving the energy efficiency of your home.
Take advantage of these incentives and talk to the home comfort experts at Buckeye Heating, Cooling & Plumbing. Our contractors can help you understand how to take advantage of these programs.
Schedule a free estimate or second opinion with our helpful team, and we will be happy to guide you.