Installing a new HVAC system is always fairly expensive. Even the most basic systems normally cost a few thousand dollars, and high-end systems can cost well over $10,000. The good news is that there are various ways you can potentially save money on a new HVAC installation. Depending on the system you choose, you may be able to write off up to 30% of the cost on your income taxes, thanks to a federal HVAC tax credit program that was introduced in 2023. Here is how you can write off your new HVAC system.
Requirements To Qualify for the Federal HVAC Tax Credit
The first thing to understand about this program is that not all new HVAC systems are eligible, as there are various criteria that must be met. For starters, the system must be installed in an existing home that you live in. This means you’re not eligible to write off part of the cost when installing the HVAC system in a home you’re building or in a property that you rent out. Additionally, you can only claim the credit if the system is installed by a licensed HVAC contractor.
Another essential point to note is that there are energy efficiency requirements that the system must meet to be eligible. Specifically, it must meet the requirements to earn an ENERGY STAR certification. For some types of HVAC equipment, these requirements vary by region. The requirements are also typically updated every year, meaning that a system that currently qualifies may not meet the requirements in the future.
How Much Is the Federal HVAC Tax Credit Worth?
The amount of tax credit you can qualify for depends on both the type of HVAC system you install and the total cost of the installation. You can potentially earn a credit of 30% of the cost of the system. However, there is also a maximum dollar amount for which different types of HVAC systems are eligible. The only exception is a new geothermal HVAC system, as you will always be eligible for 30% of the total cost when installing this type of system.
The maximum amount you can earn for a new gas furnace, central air conditioning system, or ductless mini-split AC system is $600. That means you could receive a credit of up to $1,200 if you were to install a new furnace and AC in the same year. The maximum credit you can earn for a new central or ductless heat pump system is $2,000. The two credits fall into separate categories, meaning you could earn a credit of up to $2,600 if you install a dual-fuel HVAC system with a furnace and heat pump.
The credits are part of the Energy Efficiency Home Improvement Tax Credit Program. This program also provides similar credits when you make other upgrades to improve the energy efficiency of your home. This includes improvements to your home’s envelope, such as replacing windows or doors or adding more insulation to your attic, exterior walls, etc. These other improvements fall into the first category, along with furnaces and air conditioners, meaning they can earn you up to $1,200 or 30% of the cost. However, it’s important to note that the most you can claim in this category for a single year is still $1,200.
All of these tax credits are available until the end of 2032. The program will run until the end of 2035, but you can only receive up to a 22% credit from 2033 onward.
How To Claim the Tax Credit on Your New HVAC System
Claiming the tax credit is quite simple. All you need to do is fill out IRS Form 5695 and submit it when you file your taxes for the year in which your new HVAC system was installed. You don’t need to submit the manufacturer’s certification showing that the system meets the necessary energy efficiency requirements, but you should keep this certification for your records just in case you are audited.
If you need a reputable and reliable HVAC contractor in Sarasota, FL, AirNow Air Conditioning is the one to turn to. We’ve been in business since 1946 and are ready to assist with your air conditioning and heating needs. We offer an extensive selection of central and ductless HVAC systems from trusted brands like York and can help ensure that your new system qualifies for a tax credit. We also provide financing options for new HVAC systems available with approved credit.
To receive assistance in choosing the right HVAC system for your home, contact us today to set up a consultation with one of our installation experts.
