The government is rewarding US citizens for installing new energy efficient appliances and making other energy efficient upgrades to their homes and businesses. These appliances and improvements include installing solar panels and battery storage systems, making home improvements that reduce energy leakage, and upgrading heating and cooling equipment. The reward for implementing any of these improvements, such as upgrading your HVAC equipment, is a 30% tax credit!
While there are a variety of areas where this tax credit can be applied, in this article we’re going to focus on the HVAC tax credit (25c) and how it can benefit the residents in Jackson TN in particular.
What is the Inflation Reduction Act (IRA)?
The Inflation Reduction Act, instituted in 2022, is a piece of US legislation that covers a lot of varying initiatives. These initiatives include, but are not limited to, clean and efficient energy, health care costs, and the federal deficit. It’s meant to lower energy costs for households as well as businesses while creating manufacturing jobs for American workers (which is great!).
As far as the HVAC portion of the legislation, it gives a huge incentive for Jackson TN homeowners and business owners to install high-efficiency HVAC systems. Some of the incentives include:
- Tax credits covering 30% of the costs to install heating and cooling equipment
- Extension and expansion of 25C, 25D, and 45L tax credits for CEE Highest Efficiency and ENERGY STAR® certified equipment
How the HVAC Tax Credit (25c) Applies to Jackson TN Residents
While the Inflation Reduction Act provides incentives to all states, the details of those incentives vary for each state. In Tennessee, homeowners and businesses can get a 30% tax credit when upgrading their heating and cooling equipment. There is no income limit to receive this HVAC tax credit, so all residents are eligible. The only requirement is that the equipment purchased is of the highest efficiency CEE tier, which consists of HVAC equipment with efficiency ratings equal to 15.2 SEER or greater.
Is There a Maximum Amount Allowed For the Tax Credit?
When it comes to the HVAC tax credit (25c), the maximum credit allowed overall is $1,200 for equipment such as air conditioners and furnaces. Heat pumps have a larger tax credit of up to $2,000. The max credit allowed per year for each type of equipment is as follows:
- Air Conditioner – $600 tax credit
- Furnace – $600 tax credit
- Heat Pump – $2,000 tax credit
Please note that the heat pump tax credit is separate from the tax credit that can be received from other equipment, such as an air conditioner or furnace. That means that the cap for a high-efficiency heat pump along with other equipment is capped at a total of $3,200 per year.
How to Take Advantage of the HVAC Tax Credit
We hope this valuable information regarding the HVAC tax credit (25c) available through the Inflation Reduction Act has shed some light on some of the benefits of upgrading your HVAC equipment. We carry and install high-efficiency air conditioners, furnaces, and heat pumps that meet the efficiency requirements for this tax credit.
If you live in the Jackson, TN or surrounding areas, and you’d like to learn more or get a free estimate on a new HVAC unit, give us a call at 731-300-1030. We’d love to help you take advantage of this opportunity!
Cagle Service Heating and Air is not a qualified tax professional. We recommend that you consult with a qualified tax professional to determine how these credits may apply in your circumstance.