We’ve assembled a listing of our all-climate heat pumps that qualify for the 25C Tax Credit under the Inflation Reduction Act.
The Inflation Reduction Act of 2022 (IRA) is the largest ever climate investment by the Federal Government in American history, projected to reduce greenhouse gas (GHG) by 31% to 44% below the 2005 levels by 2030. The IRA will also bring energy bill relief to U.S. households by incentivizing the adoption of more efficient, all-electric appliances. Importantly, the IRA recognizes the key role of highly efficient, variable-capacity heat pumps in slashing domestic GHG emissions and lowering energy costs for Americans.
*Interpretation of this provision varies across media channels. We're actively pursuing a universally accepted interpretation.
**Efforts are underway to simplify the efficiency performance qualifications. Check back soon for updates.
Tax Deduction Range
Base Deduction: Sliding scale of 50 cents/sqft for energy savings of 25% and up to $1/sqft for energy savings of 50% or greater
Bonus Deduction: Sliding scale of $2.50/sqft for energy savings of 25% and up to $5/sqft for energy savings of 50% or greater
Tax Deduction Range
63 cents/sqft - $1.88/sqft per eligible system
A three-year deduction cap that allows IRC Section 179D to be claimed on buildings if the previous full deduction claim occurred more than three taxable years ago
Since 2006, there's been a lifetime cap of $1.80/sqft or $1.88/sqft with inflation adjustment
ASHRAE standard in effect from four years prior to completion of construction
ASHRAE standard in effect from two years prior to start of construction
Most programs start on January 1, 2023, especially the tax credits and deductions. The 25C tax credit is in place today (at $500 max), but the expansion starts for projects billed as of January 1, 2023. The HEEHRP rebates will possibly be ready in the middle of 2023, depending on each state's delivery schedule.To Top of Section
For the rebate programs, states will have to adhere to the criteria in the law (i.e. efficiency performance standards) but will be able to alter the allocations, except when exceeding the amounts and percentages specified in the law. The tax credits are are available directly through your federal tax deductions. Consult your tax advisor for advice.To Top of Section
Starting in 2023, homeowners are eligible for a tax credit of 30% of the cost, up to $2,000, for heat pumps, and/or heat-pump water heater, in accordance with section 25C of the US tax code. Only certain models qualify for the tax credit, and you must have a tax liability from which to reduce your taxes. Consult your tax advisor for advice.To Top of Section
The 45L tax credit is aimed at contractors that build and sell qualifying energy-efficient new homes that meet specified energy efficiency requirements. If a new home meets the provisions of the ENERGY STAR® New Home program, the rebate is $2,500. Likewise, the rebate is $5,000 if the new home meets the Net Zero Ready designation from the Department of Energy.To Top of Section
HEEHRP is for lower-to-middle income homeowners and includes up to $8,000 in rebates for heat pumps, with additional rebates for electrical panel upgrades and other improvements. The cap is $14,000 maximum. Low income (making less than 80% area median income [AMI]) homeowners can receive 100% of the project cost in a rebate. Moderate income homeowners (making 80% to 150% AMI) can receive 50% of project cost in a rebate.To Top of Section
The HOMES Act provides rebates for all homeowners based on modeled energy savings for efficiency improvements, including heat pumps. If the improvement measures yield 20% modeled savings, a homeowner can receive a $2,000 rebate, and $4,000 modeling in excess of 35% savings. This rebate is doubled for lower income homeowners and building owners with lower income occupants to $4,000 and $8,000.To Top of Section
Currently, in order to qualify for the 25C tax credit, equipment must meet the the Consortium for Energy Efficiency (CEE) highest tier. In order to qualify for the HEEHRP rebate program, a homeowner must qualify as low-to-moderate income (LMI) and equipment must meet or exceed the ENERGY STAR® 6.1 specification. METUS will publish a list of qualifying equipment for both CEE and ENERGY STAR soon.To Top of Section
Our current understanding is that the funding for the rebates specified in the IRA will be available on a first-come-first-served basis until funding is depleted.To Top of Section
Congress specified $4.3B for the HOMES Act, available through 2031. The HOMES Act provides rebates for homes that cut energy by 20% across their whole home. Homeowners would be eligible for a maximum rebate of $2,000 or half the cost of the retrofit project, whichever is less. That dollar threshold rises to $4,000 for those who cut energy by at least 35%. These rebates are double — up to $4,000 and $8,000, respectively — for households with income lower than 80% of an area’s median income (AMI).To Top of Section