When it comes time to invest in a new heating or cooling system for your home, there are many options out there to choose from. It’s important to understand the potential tax credits that come along with purchasing particular types of HVAC systems. While it isn’t a write-off in the literal sense, because it’s not an expense you can claim that reduces your taxable income, it can still significantly offset the price of your new system.
With this guide, you can make a better-informed decision about what system to get for your home. We’ll discuss what types of tax credits are available for Texas homeowners who invest in certain kinds of energy-efficient HVAC replacements for their homes.
Inflation Reduction Act of 2022
Probably the most notable way that you can write off an HVAC replacement on your tax returns is under the Inflation Reduction Act of 2022. This act allows homeowners to receive up to 30% of the total cost of their new system plus installation back in the form of a tax credit on their federal tax returns. It’s very important to know that not all systems qualify for this tax credit. Only ENERGY STAR systems that are very energy efficient are going to qualify. You can get a list of the different products that qualify on ENERGY STAR’s website.
It’s also vital to note that there are different maximum credits that you can receive depending on the type of system that you get. The total maximum amount for the entire tax credit is $3,200 for the year. Geothermal heat pumps provide the highest maximum credit of up to $3,200, while an air-source heat pump can typically allow a maximum credit of $2,000 per year. Most central air conditioning systems and furnaces qualify for a tax credit of up to $600.
It’s essential to distinguish that this particular tax credit doesn’t provide you with a refund if you do not owe as much taxes as the credit is worth. For example, if you only owe $1,000 in taxes but can get up to $2,000 in a tax credit for the purchase of your new air-source heat pump, you will only be credited $1,000 on your tax return so that you owe $0. You won’t receive a refund check for the remaining $1,000. However, you can carry over this tax credit for HVAC systems to the following year. That means the next year you can take $1,000 off the total amount of taxes that you owe.
High-Efficiency Electric Home Rebate Act (HEEHRA)
HEEHRA is a state program specifically designed for low to moderate-income families who are looking to get energy-efficient upgrades to their homes. While this is technically not a tax credit, it acts as an instant rebate that you get at the time of purchasing your new HVAC system. The amount of the credit is going to depend on the type of system that you purchase for your home and your income level.
For example, you can receive a credit of up to $14,000 for having a new heat pump installed in your home if you are considered low-income. Those who are considered to have a moderate income can receive a credit of $7,000. This program is offered by the State Energy Conservation Office (SECO), and you must speak with an approved contractor who must get approval from SECO prior to system installation.
Utility Company Rebates
As with most states, many utility companies throughout Texas offer their customers incentives for purchasing energy-efficient HVAC systems. To qualify for this type of incentive, you must be a residential customer of the utility company that you’re trying to get the rebate from. For example, Oncor’s ‘Take A Load Off Texas Home Energy Efficiency Program’ is available for Texas homeowners who have service from Oncor. This large utility company is comprised of many sub-companies like Discount Power, Frontier Utilities, Chariot Energy, Green Mountain, and so much more. You can check your utility meter to determine if Oncor is the major service provider. The incentive is available for certain heating and cooling systems as well as other energy efficiency services, such as adding attic insulation to your home.
With this incentive, you can receive up to $3,400 toward the installation of a new high-efficiency heating or cooling system for your home. It’s important that you select a system that’s qualified under the program outline, which is typically a high-efficiency system. This particular incentive is passed on to the approved heating and air conditioning company you use. It then reduces your installation bill based on the incentive amount that you qualify for.
Reliable HVAC Replacement Service
Talk to a tax professional about the details of the IRA, and when you’re ready to look at new systems, Totally Cool Heating & Air offers reliable heating and cooling installation service to the Austin, TX area. We can also assist with all your HVAC installation, repair, and maintenance needs. Simply call us today to schedule your next service consultation with one of our knowledgeable installation technicians.
