The Inflation Reduction Act includes incentives for heating and air conditioning upgrades! Buying a Heat Pump could get you thousands in Federal Tax credits and State rebates.
What is the Inflation Reduction Act?
If you opt to install a heat pump, you’ll be eligible for a federal tax credit for models that achieve the Consortium for Energy Efficiency’s (CEE) highest tier for efficiency. This tax credit is good for 30 percent of the total cost of what you paid for your heat pump, including the cost of labor, up to $2,000; and it would be available through the end of 2032.
What Other Incentives Are Available?
Beyond the tax incentive, you also could be eligible for up to $1,750 for a heat pump water heater and $8,000 for a heat pump for space heating and cooling. Both incentives would be in the form of a state-administered rebate on any heat pump model. In this case, there are no federal efficiency requirement guidelines beyond the minimum standards required by the Department of Energy.
Who Qualifies for a Heat Pump Tax Credit or Rebate?
Any taxpayer would qualify for the federal tax credits. For the tax credit program, the new incentives will apply to equipment installed on January 1, 2023 or later. (A smaller tax credit of up to $300 for a heat pump meeting the CEE’s top tier of efficiency is available for heat pumps installed during 2022.)
What Rebates Are Available?
If your household income is less than 80 percent of your state’s median household income, you are eligible for 100 percent of the rebates available. So if you spend $10,000 on a heat pump and a heat pump water heater, you could get $9,750 back, depending on the specifics of your state’s rebate program.
If your household income is 80 percent to 150 percent of your state’s median income, you are eligible for 50 percent of the rebates available. So for a $10,000 heat pump and heat pump water heater, you could get $4,875 back, depending on specifics.
If your household income is more than 150 percent of your state’s median income, you are not eligible for these rebates.
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