Many people area starting to hear about the Inflation Reduction Act of 2023 which was passed this year.
This act offers homeowners a $2,000 tax credit for heat pumps and air conditioners installed after January 1st, 2023. To maximize your savings, it is important to understand what is necessary to qualify for this tax credit and how you can go about getting it.
Here are some tips on unlocking the full benefits of this program and how you can get up to a $2,000 tax credit with a new heating or cooling system.
What HVAC System Qualifies for a 2023 Tax Credit?
The first thing we get asked all the time, is “What HVAC system qualifies for the 2023 tax credit in the first place?”
The HVAC systems that qualify for the 2023 Federal Tax Credit include air conditioners, heat pumps, and mini splits that are installed in existing residences after January 1st, 2023 and before December 31st, 2032. Unfortunately, new construction homes do not currently qualify for this tax credit.
Furthermore, these systems must be installed at the primary residence, which can include condos, mobile homes, co-ops, patio homes and even houseboats, as long as it is classified as the primary residence.
Heat Pumps Qualify for up to $2,000 Tax Credit
As a Kentucky homeowner, you can get up to 30% of the total cost for an Air Source Heat Pump installation covered by the government with a maximum benefit of $2,000. Additionally, your Heat Pump must meet or exceed their efficiency ratings. We can explain more in a quick conversation if you would like more information.
These credits also apply to air conditioner replacements, which can be covered up to 30% of the cost with a maximum benefit of $600.
Which Replacement AC Units & Heat Pumps Qualify?
If you’re living in the South Central Kentucky area and are considering replacing your HVAC system, it’s important to know that not all new AC units or heat pumps qualify for the HVAC tax credit. There are standardized efficiency requirements in place that must be met in order to qualify.
Our Project Managers are knowledgeable about which models meet eligibility requirements and can help you decide which one is right for you, simply give us a call and we’ll be happy to cover the options available which qualify for the efficiency requirements in the Inflation Reduction Act of 2023.
If you live outside of the South Central Kentucky area, we recommend consulting your local air conditioning & heating company to ensure that you purchase an AC unit or heat pump that qualifies for the tax credit.
Q: If I purchase a qualifying Air Conditioner or Heat Pump, will I receive a check from the IRS?
A: The tax credit is simply a credit, not a refund. This means that in order to receive a credit, you must owe federal tax. If you don’t owe any federal tax, this does not entitle you to a refund.
For example, if your federal tax burden is $3500 and you qualified for the $2000 tax credit, this would reduce your tax amount to $1500.
Q: What if I purchased qualifying equipment and had it installed before 1/1/2023?
The Inflation Reduction Act of 2023 only applies for qualifying equipment purchased and installed after 1/1/2023. You may qualify for other credits, but not this particular one. Consult your tax advisor for more information.
Q: To receive the Tax Credit, do I need to submit any special form?
A: There is an IRS form that must be submitted. You should file IRS Form 5695 and include it with your tax return. Definitely consult your tax professional before making your final decision.
If you have any more questions about the Inflation Reduction Act of 2023 we would love to help clear things up for you. Just contact us and one of our project managers will gladly assist and help you to understand what systems qualify for this credit.