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How to Save Money With Inflation Reduction Act Tax Credits

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hvac tax credits

An HVAC or plumbing emergency can occur at any time. The need for equipment replacement often arises when you don’t have the budget for it. Fortunately, the Inflation Reduction Act (IRA) of 2022 includes tax credits that can help you save by investing in clean energy. We’ll look at tax credits, rebates, and other incentives in North Carolina you can benefit from.

25C Tax Credits You Can Qualify For

You can qualify for a credit equal to 30% of qualifying expenses, including energy efficiency improvements, residential energy property expenses, and home energy audits. These credits became available starting on January 1, 2023.

In North Carolina, you can qualify for a total annual credit of $3,200. Here are some improvements and credits that are available:

  • Heat Pump: $2,000
  • Heat Pump Water Heater: $2,000
  • General Energy Efficiency Improvements: $1,200
  • Air Conditioner: $600
  • Furnace: $600
  • Water Heater: $600
  • Boiler: $600
  • Electrical Panel: $600
  • Energy Audit: $150
  • Kitchen Exhaust Hood – Demand Control Ventilation: $220
  • Refrigerator: Up to $55
  • Glass Door Reach-in Freezer: Up to $350
  • ARC Heat Pump: Up to $317
  • Connected Smart Thermostat: $60
  • Water Source Heat Pump: $110
  • High-Efficiency Fan: $110
  • High Volume Low-Speed Fan: $1,100

For more information on all available energy efficiency tax credits, check these Smart $aver® rebate pages from Duke Energy:

[I only have the Asana links for these PDFs, not the actual pages, since I live in Florida]

  • Controls Equipment
  • New High-Efficiency Refrigeration Equipment
  • Controls
  • New High-Efficiency Heating and Cooling Equipment
  • Upgrades to Improve Operation of Existing Heating and Cooling Equipment
  • Upgrades to Make Existing Refrigeration Equipment More Efficient

How Do I Save Money Using IRA Tax Credits?

If you make changes to your home that improve energy efficiency, you can qualify for tax credits, rebates, and incentives. These include upgrades to HVAC, refrigeration, and water heating equipment. If your older water heater uses more energy than necessary, you’re probably spending more on energy and water bills. A high-efficiency model can not only qualify you for a tax credit but also save on your monthly utilities.

Tax credits are also available for electrical upgrades. A home that’s decades old with its original wiring is not as efficient as it could be and has potential safety hazards. However, important upgrades can be affordable. The IRA reduces the financial burden of specific upgrades with options such as:

  • High-Efficiency Electric Home Rebate Act (HEEHRA): Low- and middle-income homeowners can receive up to $14,000 on eligible energy-efficient upgrades. Low-income homeowners can be covered for 100% of the costs of professional electrical services and equipment (middle-income homeowners can be covered for up to 50% of these costs).
  • The HOMES Rebate: It provides an incentive to make energy-efficient changes that reduce total energy output. The cash back rebate ranges from $2,000 to $8,000 and homeowners in all tax brackets qualify (low- and middle-income homeowners can receive the highest rebates).
  • Energy Efficient Home Improvement Tax Credit: Homeowners can deduct up to 30% of their energy-efficient upgrades, given they adhere to the Consortium For Energy Efficiency and meet Energy Star requirements. The maximum rebate amount is $3,200.

How Do I Qualify for a Home Improvement Credit?

You can claim the credit for improvements to your main home (usually your primary residence).  It must be located in the United States and be an existing home (not a new one). Landlords, off-site property owners, and those using the property solely for business purposes cannot claim the credit. However, if you use your home partly for business, you may still be eligible for the tax credit.

How Do I Qualify for a Home Energy Audit Tax Credit?

The home energy audit must include an inspection and written report that identifies significant energy efficiency improvements and estimates the potential energy and cost savings. The energy audit must be performed by a certified home energy auditor, who must also prepare and sign the written report.

How Do I Claim the Energy Efficient Home Improvement Credit?

When submitting your tax return, you must file Form 5695, Residential Energy Credits Part II. The credit must be claimed for the tax year the equipment is installed.

Do Subsidies, Rebates, and Incentives Affect My Tax Credit?

Public utility subsidies and rebates are considered purchase price adjustments. Therefore, you may have to subtract them when calculating your credit. Rebates are subtracted if they: 

  • Are based on the cost of the property
  • Come from someone connected to the sale
  • Aren’t given as a payment for services you provide.

State energy efficiency incentives are generally not subtracted. Most don’t qualify as rebates, even though many states label them as such. The exceptions are incentives that qualify as a rebate or purchase-price adjustment under federal income tax law.

Contact QRC to Learn More About Energy Efficiency Upgrades

We are a leading residential heating and cooling and commercial HVAC and refrigeration company in Winston-Salem, NC. Committed to putting our customers first, we specialize in energy-efficient solutions that save you over time. Special offers and financing help make our services more affordable. To learn more about our heating and cooling equipment options and service packages, submit a request form or call (336) 443-8641.