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2023 Tax Credits for HVAC Installation

Mar 22, 2023 | General

If you know that your heating or air conditioning system is coming up on its last year or so of operation, you’re in luck! Recent legislation has made new federal tax credits available through the Inflation Reduction of 2022, making it the perfect time to make those energy efficiency improvements in your home.

This blog will explain how this new Inflation Reduction Act benefits those preparing to upgrade their HVAC systems and other household appliances. 

Inflation Reduction Act of 2022 Explained 

Due to the rising inflation costs, the U.S. Government passed the Inflation Reduction cost to slow the inflation rate. This law includes incentives for homeowners and business owners who make energy efficiency upgrades. The incentives are provisions made through tax credits and rebates to help offset the costs of purchasing and installing new heating, air conditioning, and generator systems. these programs are available from the federal government through December 31, 2032, or until funds run out. 

What it means is that if you make HVAC upgrades using high efficiency, clean energy equipment, you can get a tax deduction at the end of the tax year to offset the costs. Save money on taxes while getting a cheaper HVAC upgrade? Sounds like a good deal to us!

Tax Credits for Heat Pump Water Heaters and other HVAC Products

If you choose to make any energy-efficient upgrades in your home this year, you can claim up to $2,000 in tax credits, depending on the system you install. Each region of the U.S. has to meet specific criteria when installing energy efficient appliances like new heat pumps, air conditioners, and furnaces. Below are the requirements and the tax credit you can claim for each ENERGY STAR-certified heating or cooling product you purchase in Alabama. 

New Heat Pumps

A heat pump installation is always a costly one. The federal government made it a tad easier to afford it with the tax incentives in the Inflation Reduction Act. Purchases of the following types of heat pump systems that meet the required ratings will be eligible for up to a $2,000 tax credit: 

  • Split Ducted Heat Pump – with SEER2 ≥15.2, EER2 ≥11.7, HSPF2 ≥7.8
  • Non-Ducted Heat Pump – with SEER2 ≥16, EER2 ≥12, HSPF2 ≥ 9
  • Packaged Heat Pump – SEER2 ≥15.2, EER2 ≥10.6, HSPF2 ≥7.2

When you factor in the opportunities you get to save money on energy costs with a new heat pump along with these new tax incentives, you will quickly see the short term savings on installation costs and long term savings on utility bills. It is a well worth investment, especially now!

Central Air Conditioners

The installation costs of an air conditioner have a high upfront cost and many people, especially those with a low income, struggle to make those payments. Thanks to the Purchases of air conditioning systems that meet the standards outlined below can qualify for up to a $600 tax credit:

  • Split AC – with SEER2 ≥16.2, EER2 ≥12, 
  • Packaged AC – with SEER2 ≥15.2, EER2 ≥11.5

These tax credits don’t just apply to central air conditioners but also to any other type of air conditioner that comes with a high energy efficiency upgrade.


The home energy efficiency tax credits also apply to new furnaces. Purchases of gas-fired forced air furnaces must have a rating of ≥97% AFUE to qualify for up to a $600 tax credit. 

High-Efficiency Electric Home Rebate Program (HEEHRP)

In addition to providing generous tax credits, the U.S. Government also designed a program that offers income-based rebates on HVAC purchases. This program makes rebates available only to those who make high-efficiency electric upgrades on heat pumps and electrical systems. The rebate program provides a maximum of $14,000 for all installations. 

To qualify for a 100% rebate through this program, your household income must be 80% of the local moderate-income households. However, if your income falls between 80% to 150%, you will qualify for a 50% rebate on your purchase.

Unfortunately, those whose income is over 150% of the local median income do not qualify for any rebates. This rebate program was funded with four million dollars and will remain available until funds run out. 

What Do the Federal Income Tax Credits Mean for Me?

The newly available tax credit and rebate program mean purchasing new heating and cooling systems just became easier to afford. There is no better time to upgrade your home equipment to live a more comfortable life. But act now,  before funds run out for the rebates and tax credit program. 

Contact Us to Take Advantage of the Tax Credit Program!

Take advantage of the new tax credits and energy efficiency upgrades for your HVAC systems! Contact Hansen Super Techs for a free estimate and to learn how you can make the tax credits work for you.

FAQ: Tax Credits and Rebate Programs for Energy Efficiency Improvements

How much will the Internal Revenue Service get in the Inflation Reduction Act?

The Internal Revenue Service is scheduled to receive approximately $80 billion over the next year to fund the tax credits under the Inflation Reduction Act of 2022.

What are the benefits of the Inflation Reduction Act?

The benefits are that the energy security of our country will be strengthened. More importantly, Americans will now have the opportunity to save money on energy bills through the energy improvements they make in their homes.

In addition to that, they will also save money on installation costs of these energy efficient upgrades, whether they are getting a new central air conditioner, electric heat pumps, electric stoves, electrical panel upgrades, or even electric vehicles. There has never been a better time to reassess our home energy efficiency and make improvements!

Who qualifies for the Inflation Reduction Act?

Here are the eligible applicants for the tax credits and rebate programs under the Inflation Reduction Act:

  • Low-income households
  • Moderate income households
  • Owners of multifamily buildings
  • Government entities, and commercial or nonprofit organizations providing qualified electrification projects and energy efficiency improvements.

What energy-efficient appliances are covered under the energy savings programs with the federal government under the Inflation Reduction Act?

  • Electric heat pump water heaters
  • Space heat pumps for heating and cooling
  • Electric heat pump clothes dryers
  • Electric stove, cooktop, range, or oven
  • Electric vehicles