Get a Tax Credit when you have a Heat Pump Installed.
New tax credits are now available under the Inflation Reduction Act (IRA), which was passed in August 2022. This legislation represents the largest governmental investment ever in reducing greenhouse gas emissions. It includes tax credits for various energy-efficient upgrades such as heat pumps, heat pump water heaters, weatherization improvements, electric panel upgrades, and installations of solar and battery storage systems.
Benefits of Installing a Heat Pump
Installing a heat pump offers several benefits, making it an attractive option for both residential and commercial spaces:
- Energy Efficiency: Heat pumps are highly efficient in heating and cooling compared to traditional HVAC systems. They operate by transferring heat rather than generating it, which can significantly reduce energy consumption and utility bills.
- Heating and Cooling in One: One of the primary advantages of a heat pump is its ability to provide both heating and cooling. It can extract heat from the outside air (even in cold temperatures) to heat your home in winter, and reverse the process to cool your home in summer.
- Cost Savings: Due to their efficiency, heat pumps can lead to cost savings on energy bills over time. While initial installation costs may be higher than conventional systems, the energy savings can often offset this initial investment.
- Quiet Operation: Heat pumps typically operate more quietly than traditional HVAC systems, which can contribute to a more comfortable indoor environment without disruptive noise.
- Longevity and Durability: When properly maintained, heat pumps can have a longer lifespan compared to traditional systems. They generally require fewer mechanical components, reducing the likelihood of major repairs.
- Improved Comfort and Control: Heat pumps offer precise temperature control and consistent heating or cooling throughout your space. Some models also come with advanced features like programmable thermostats for customized comfort.
What Is the Heat Pump Tax Credit?
Thanks to the Inflation Reduction Act (IRA), homeowners who have made or plan to make eligible energy-efficient upgrades to their homes since January 1, 2023, may be eligible for a tax credit from the IRS.
For projects involving heat pumps and heat pump water heaters, the tax credit equals 30% of the total project cost (including equipment and installation), capped at a maximum of $2,000. The credit applies to the tax year in which the heat pump is installed; for instance, if installed in 2023, the credit can be claimed when filing taxes in 2024 for the 2023 tax year.
This tax credit falls under the Energy Efficient Home Improvement Credit and does not have a lifetime dollar limit. Homeowners can claim the maximum annual credit each year they make qualifying improvements through the end of 2032. Other eligible improvements include home energy audits and qualifying insulation projects.