What is the Inflation Reduction Act?
The Inflation Reduction Act is the largest clean energy investment America has ever made, with strategic incentives to make the transition to clean energy and a decarbonized life easy and financially smart.
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.
• A 10-year extension and expansion of existing 10% tax credit to 30%.
• Begins with tax year 2023 (January 1, 2023), claim credit on your 2023 taxes.
• Up to $600 per item: breaker panel, insulation, fossil fuel systems (meeting elevated efficiency limits) with maximum of $1,200 tax credit.
• However, tax credit increases up to $2,000 max when adding a qualified heat pump installation to the project.*
• The heat pump system must meet or exceed the highest performance tier set by the Consortium for Energy Efficiency (CEE).**
• Households may claim annually through 2032.
• You can receive a tax credit and a rebate for the same project.
*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.
Generally, when do the incentive programs begin?
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.
Will each state operate differently?
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.
What is the 25C tax credit?
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.
What is the 45L tax credit for newly built homes?
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.
Which Mitsubishi Electric, Trane/Mitsubishi Electric, or American Standard/Mitsubishi Electric models are eligible, and how will I know?
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.
Download a Listing of our Heat Pumps that Qualify for the 25C Tax Credit
We’ve assembled a listing of our all-climate heat pumps that qualify for the 25C Tax Credit under the Inflation Reduction Act. Click the image to the right to download. Check back often as we’ll continue
to update this information.
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– Mike Terry