With the Inflation Reduction Act (IRA) signed into law in August of this year, new clean energy incentives and increased tax rebates will be available for HVAC/R systems. Heat Pumps, Geothermal Heat Pumps, and Heat Pump Water Heaters are included in the IRA plan. Although the details on the tax forms and how each state will implement the incentives have yet to be finalized, incentive and tax rebate guidelines for the program are now available. The overarching goal being to reduce our nation’s carbon emissions 40% by 2023, as compared to 2005 levels.
The non-profit ,Rewiring of America, made an easy-to-use calculator available for estimating incentives and tax rebates for each type of system/appliance covered in the Inflation Reduction Act’s $4.3 billion in state-administered funds – Rewiring of America’s IRA Savings Calculator
The existing 2022 HEEHRA tax credit for heat pumps covers up to 10% of system cost, with a $300 cap. The new 2023 tax credit will offer tax rebates up to $8,000 for heat pumps, dependent on income. For heat pump water heaters, the 2023 tax structure will allow a 30% tax credit, capped at $2000 per year. This credit will reset each year, allowing home and business owner’s to capitalize on these incentives for various projects each year.
Geothermal heat pump systems will be allotted an uncapped 30% tax credit on the total installation cost until 2032! Geothermal installation costs will vary based on the size of the building to be conditioned, as well as the drilling and excavation costs associated with installing a geothermal ground loop. Be sure to speak with your accountant about how best to utilize these state and federal rebates and incentives!
Water-to-Air, Water-to-Water, & a Heat Pump Water Heater installed by GSK for a new construction home in Dorset, VT
Although high-income earners (making over 150% of the Area Median Income) will not be able to utilize the incentives, they will still be able to take advantage of the tax credits. With the IRA being the largest decarbonization investment ever made by the federal government, various Internal Revenue Codes (ie: Secton 45, Section 48a, Section 179d-Commercial, and Section 25d) have been amended to further incentivize energy efficient appliances and renewable energy source infrastructure. These incentives will allow building/homeowners to afford high-efficiency HVAC systems such as Geothermal which utilize a renewable energy source instead of fossil fuels to condition your home or business, that typically require a substantial upfront capital investment.
Resources:
- https://www.esmagazine.com/articles/102714-engineers-react-to-the-inflation-reduction-act?oly_enc_id=3425J2602790F5X
- https://www.achrnews.com/articles/147162-inflation-reduction-act-incentives-could-mean-more-business-for-hvac-contractors
- https://www.efficiencyvermont.com/blog/our-insights/how-the-new-climate-law-could-help-you-save-money
- https://www.whitehouse.gov/wp-content/uploads/2022/08/Vermont.pdf
- https://www.catf.us/2022/08/inflation-reduction-act-what-it-is-what-it-means-how-it-came-to-pass/#:~:text=Through%20provisions%20that%20invest%20in,research%20and%20development%20to%20deployment.
- https://bipartisanpolicy.org/blog/inflation-reduction-act-summary-energy-climate-provisions/
Office Administrator, GSK Climate Control, Inc.
