The Inflation Reduction Act extends and modifies the expired Section 25C homeowners tax credit in two steps. First it retro's the old 25C tax credit values and qualifying criteria for the year 2022. It also puts new 25C tax credit values and qualifying criteria in place for 2023 through 2032. There are 5 other sections that include rebates and tax credits for home owners. This page is only going to cover the section 25C as it is currently available and the most common one to be used by homeowners. ** Please understand that we are not accountants and we strongly recommend that you reach out to your accountant to understand your unique tax situation and how to apply this non-refundable tax credit.
Before we dive into the details I think that it is very important to understand that the 25C tax credit uses the CEE (Consortium for Energy Efficiency) to set the standard of what qualifies and what does not. Just recently the HVAC Industry changed over to SEER2 from SEER (Seasonal Energy Efficiency Rating). This is the scale by which all HVAC appliances are measured for their efficiency rating. The new SEER2 has updated this testing to now include a calculation that uses a new M1 blower testing procedure. This SEER2 rating is what is used by the CEE to determine appliances that are Energy Efficient and rank above the standard rating. I know.... This is all very complicated, but fortunately for you as the home owner it is a bit easier. Any HVAC product that has a final rating of 15.2 SEER2 or above will qualify for the tax credit. It is also worth noting that now for 2023 - 2032 the tax credit includes non ducted equipment such as min-splits. So let's lay out a couple of charts to help you understand the credits for each type of HVAC System.
This is a non-refundable tax credit
HVAC Retrofit Caps and Qualifying Criteria
This is a non-refundable tax credit
HVAC Retrofit Caps and Qualifying Criteria
This is a non-refundable tax credit
HVAC Retrofit Caps and Qualifying Criteria
This is a non-refundable tax credit
HVAC Retrofit Caps and Qualifying Criteria
There are a few other changes for the 25C tax credit or 2023 - 2032. Notably they added non ducted systems, changed the lifetime limit of $500 to and annual limit of $1,200, went to the SEER2 rating scale and increased the limit from 10% to 30% of the project. Last but not least, it no longer has to be your primary home to collect the credit. The addition of two other credits are:
As you can see these credits are highly favorable to total electric systems such as heat pumps. This is due to the efforts of our nation to move away from fossil fuels. Also moving forward the qualifying criteria is fluid and will adjust based on current CEE guidelines.
As a quick example of a HVAC retro project, lets use a 3 ton 15.2 SEER2 Split Heat pump. With an average installed price of 10 to 12 thousand dollars here in SC. Properly installed by a qualified company, such as AAA Heating & Air you will get a tax credit of $1,200 plus a credit of $2,000 for the 30% of project cost. Now we replace the electrical disconnect and upgrade the whip to the unit. This will get you another $600 credit. So far we have a $3,800. Lets take this a step further and make this system a dual fuel. Now we are eligible for another $600.00 credit. That is a total of $4,400. Pair that with the AAA $1,500 old equipment buy back and our 15 year parts and labor warranty for a complete win to you the homeowner. There has never been a better time to get your home safe and comfortable.
AAA Heating & Air, LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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