Tax Credits and Rebates

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What are tax credits?

Purchasing certain HVAC systems or making other energy-related improvements to your home may qualify you for federal tax credits. Before you buy, research which products let you save with federal tax credits.

What are rebates?

Rebates are location-based incentives that help you save money while making smarter energy choices with your HVAC system. Discover how much you can save and apply through your local power provider.

Inflation Reduction Act Incentive Details

Great news for homeowners!

Recent legislative changes may mean that upgrading your HVAC system may not only save you energy costs, but also earn you tax credits and rebates.

· If you installed eligible HVAC equipment before December 31st, 2022, you may be eligible for tax credits of $50 to $300 or up to 10% of the installed costs ($500 maximum) under the former Internal Revenue Code 25C guidelines.

· If you installed/will install eligible HVAC equipment between January 1, 2023, and December 31, 2032, you may be eligible for tax credits up to 30% of installation costs (up to $1,200/year) under the expanded Energy-Efficient Home Improvement Tax Credit 25C program. 

Other changes to the 25C tax credit include:

- Qualified heat pumps have a separate yearly limit of up to $2,000.

- Air conditioners and furnaces that meet eligibility requirements may qualify for up to $600 each.

Note: The maximum 25C tax credit amount is $3,200 when a qualifying heat pump is included in the purchase.

Note: The maximum 25C tax credit amount is $3,200 when a qualifying heat pump is included in the purchase. 

As part of the Inflation Reduction Act (or IRA) signed in August of 2022, nearly $370 billion have been set aside to incentivize residential energy-efficient purchases. The Internal Revenue Code Section 25C credit was significantly enhanced as of January 1, 2023, offering greater savings to homeowners—in addition to the utility bill savings associated with energy-efficient HVAC systems.

Learn more about the Inflation Reduction Act's Energy Efficient Home Improvement Tax Credit (25C).

Please note: Specific information regarding the qualified systems and how to claim Home Improvement Tax Credits for 2023 and beyond is forthcoming pending the release of application instructions from the IRS.

Note: Specific information regarding the qualified systems and how to claim Home Improvement Tax Credits for 2023 and beyond is forthcoming pending the release of application instructions from the IRS. 

Local energy efficiency rebate programs:

Your state or local municipality may offer additional rebate programs relating to energy-efficient upgrades. Use the EcoRebates search tool at the top of this page to discover additional rebates available in your area.

Please note: The rebate programs vary from state to state and can differ depending on your income.

How to apply for a federal energy tax credit

Subject to IRS regulations, tax credits apply as a direct reduction of taxes owed. To apply, follow these steps. Note: The process outlined below is for the filing process for equipment installed prior to December 31st 2022. The IRS has not yet defined the process for 2023. Check back for updates.

Step 1

Download your system’s manufacturer’s certificate for your records.

Step 2

Consult a tax professional on other ways to take advantage of energy tax credits.

Step 3

Submit Form 5695(2022 Form 5695 (irs.gov) with your tax returns to the IRS. Learn how to properly submit here (About Form 5695, Residential Energy Credits | Internal Revenue Service (irs.gov)).

Manufacturer’s certificates

Download and save the manufacturer certificate that matches your system type. These certificates will be helpful when filing your federal taxes for 2022. *Note: The 2023 application process is not yet available from the IRS. Check back for updates and certificates, if applicable.

Advanced main air circulating fan manufacturer’s certificate

Advanced main air circulating fans can be found in gas furnaces and packaged systems. Packaged systems are all-in-one solutions with most of the equipment housed in a single cabinet. The fan should utilize no more than 2% of the furnace’s total energy

Gas furnace manufacturer’s certificate

Gas furnaces use natural gas or propane to generate heat for your home. Your system must meet the following efficiency rating: 95% AFUE

Heat pump of dual fuel products manufacturer’s certificate

Heat pumps use electricity to heat and cool your home. Dual fuel systems use a combination of electricity and natural gas. Your system must meet all the following efficiency ratings: 14 SEER, 12 EER, 8 HSPF

Packaged air conditioning manufacturer’s certificate

Packaged systems are all-in-one solutions with most of the equipment housed in a single cabinet. Your A/C must meet the following efficiency ratings: 14 SEER, 12 EER

Split system air conditioning manufacturer’s certificate

Split system air conditioners have both an indoor and outdoor unit. Your A/C must meet all the following efficiency ratings: 16 SEER, 13 EER

Split system air conditioning manufacturer’s certificate

Split system air conditioners have both an indoor and outdoor unit. Your A/C must meet all the following efficiency ratings: 16 SEER, 13 EER

AHRI Certification Directory (ahridirectory.org)