2023 IRA Tax Credits: Important Details

DG Heating & Cooling - IRA Credits for Heat Pumps

The Inflation Reduction Act of 2022 recently went into effect. The purpose of this act is to alleviate inflation and includes lowering carbon emissions produced by businesses and homeowners throughout the United States.

This requires hefty investments in new clean energy sources – approximately $369 billion.

What does this mean for the world of heating and cooling? Part of the new Inflation Reduction Act (IRA) law offers rebates and tax incentives for homeowners who have qualified heat pumps installed. Rebates come from the High-Efficiency Electric Home Rebate Act (HEEHRA - part of the IRA). Certain homeowners may even get their heat pumps absolutely free!

Provided is an overview of the IRA tax credits and what they mean for homeowners served by DG Heating & Cooling throughout Racine and Kenosha.

Why Do Heat Pumps Apply?

The primary purpose of the IRA is the ongoing development of renewable energy sources such as solar, wind, or hydro power. Unlike fossil fuels, these types of clean & green energy sources do not produce carbon emissions.

The IRA is including homeowners in this equation as they look to encourage individual homes to become "greener" overall. The IRA has focused on heat pumps to achieve this initiative as they are an air conditioner and heater in one. Heat pumps run much more efficiently than older, traditional furnaces, and typically provide cleaner air throughout a home.

New IRA Provisions for Homeowners

For homeowners, the new IRA provisions come in the form of rebates and tax credits. The amount of these rebates or tax credits is based on household income:

  • Low-income homes: 100% rebate on qualifying heat pumps, up to $8,000
  • Middle-income homes: 50% rebate on qualifying heat pumps, up to $8,000
  • High-income homes: 30% tax credit on qualifying heat pumps, up to $2,000

To determine which income level fall under, please use this Fannie Mae reference link.

Will My Heat Pump Apply?

Heat Pumps installed by DG Heating & Cooling are produced by Ruud – a leader in high efficiency HVAC products with a focus on energy efficiency. The Ruud heat pump models we recommend for homeowners meet or exceed the Consortium of Energy Efficiency's most efficient tier and are ENERGY STAR-certified.

There are several exceptions for the IRA's heat pump credit program including:

  • Heat pump installation must be made in an existing home. New home construction does not qualify.
  • The credit will not apply if the home is used solely as a business.

It is important to note - electric or natural gas heat pumps qualify, as do electric or natural gas heat pump water heaters.

How to Claim the Rebate or Tax Credit

If your income level allows for the receipt of IRA rebates, they will come from HEEHRA at the Department of Energy. Additional details are outlined on this website.

For a tax credit, homeowners can find the form (5695) here. Include the completed form 5695 with your taxes or talk with your tax preparer.

For more information about having a new Rudd heat pump installed by DG Heating & Cooling and to learn if you qualify for these IRA rebates and incentives, please call us at (262) 496-3824. We take pride in helping our customers with their bottom line whenever possible and look forward to helping you save money and stay comfortable within your home!

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