Taking Advantage of The Inflation Reduction Act Tax Credits: Patience Pays Off
The Inflation Reduction Act of 2022 both extends and expands existing 25C and 25D tax credits to homeowners and 45L tax credits to home builders for installing applicable high-efficiency HVAC equipment. Each of these credits has specific efficiency requirements to qualify, as outlined in the chart below. The bill applies to systems installed in 2022, and some of these credits will increase in 2023.
Here is a summary of the tax credits as they stand now and for the coming years:
Tax Section 25C
2022 Tax Credit Details
- 10% of cost up to $500
Air Conditioners - Up to $300 tax credit
Heat Pumps - Up to $300 tax credit
Gas Furnaces and Boilers - Up to $150 tax credit
Advanced Main Air Circulating Fan - Must use no more than 2% of the furnace’s
total energy, up to $50 tax credit
2023-2032 Tax Credit Details
- 30% of cost up to $1,200 ($2,000 for Heat Pump)
Products must be in the highest efficiency CEE tier
Air Conditioners - Up to $600 tax credit
Heat Pumps - Up to $2,000 tax credit
Gas Furnaces and Boilers - Up to $600 tax credit
Advanced Main Air Circulating Fan - Must use no more than 2% of the furnace’s
total energy, up to $50 tax credit
Tax Section 25D
2022-2034 Tax Credit Details
- 30% for systems placed in service
during the calendar year 2022 through
Calendar year 2032 - 26% for systems placed in service
during calendar year 2033
- 22% for systems placed in service
during calendar year 2034
Tax Section 45L
2022-2032 Tax Credit Details
Single Family
- Single Family New homes –
$2,500 tax credit - Zero-energy Single Family New
Homes – $5,000 tax credit
Multifamily
- Multifamily Units – $500 tax credit
- Zero-Energy Multifamily Units
- $1,000 tax credit
