Heat pumps are energy efficient and have been around for decades. You don’t need separate units for heating and cooling, as this system does both. A heat pump will provide heat when it’s cool outside and can be reversed to cool your home by moving hot air outside. However, there are now more benefits than ever to installing a heat pump, including affordability (more on that shortly).
There is always ambient heat in or above the Earth. An air-source heat pump can transfer heat even if it feels cold. It’s able to process what heat is available. Meanwhile, a geothermal heat pump obtains heat from underground, where the temperature is relatively constant year-round. But a newer aspect of heat pumps is the tax credits that went into effect on January 1, 2023 (the Inflation Reduction Act was signed into law on August 16, 2022).
Heat Pumps Are Becoming More Affordable
As part of the Inflation Reduction Act of 2022, qualifying Arizona homeowners can receive energy tax credits for improvements such as installing heat pumps. Low-income households can be covered for up to 100% of the costs. They can receive a money-saving incentive of up to $8,000, which covers the cost of many heat pump models.
For households with a moderate income, 50% of the costs of installing a heat pump can be covered. Those earning higher incomes can receive a tax credit of up to $2,000 for their energy-efficient upgrade. But the first steps are to find a reputable contractor, obtain several estimates, and have your home evaluated by a professional. Then you’ll know the costs that can be offset, so you can save and benefit the environment.
How Does a Tax Credit Differ from a Deduction or Rebate?
A tax credit is a form of reimbursement. It’s provided on the condition that a person or business has invested in energy-saving/renewable energy technology. The credit can reduce what you owe in federal income taxes. It can also be added to a tax refund.
While it also reduces the amount owed, a deduction lowers taxable income. Therefore, the amount that you owe is reduced. Unlike a credit, it doesn’t directly decrease the dollar amount of your tax bill. Both tax credits and deductions are managed at tax time. However, a rebate may be paid out just weeks after the completion of your project.
Currently, rebates for home energy efficiency upgrades are not issued at the federal level.
How Do I Claim a Heat Pump Tax Credit?
The cost of heat pump installation is claimed as a home energy tax credit when you file federal income taxes. But it’s not the only energy upgrade you can claim. For other updates like energy-efficient windows and doors, or adding insulation, you can claim up to 30% or a maximum of $1,200 per year. Completing a home energy audit can qualify you for a $150 tax credit. The total credits one can claim for these updates is $1,200 but the new legislation adds $2,000 on top of that for a heat pump.
The Inflation Reduction Act also extends residential energy efficiency tax credits through 2032. But that’s not all. For homeowners and builders of energy-efficient homes, tax credits were extended retroactively through December 31, 2022. That means those who invested in energy-efficient upgrades may be eligible if they did so before January 1, 2023.
Contact Hays Cooling, Heating & Plumbing
We are a leader in heating installation and replacement in Phoenix, AZ. A certified dealer of high-quality brands, we provide reliable, efficient equipment and property size each system to ensure your comfort and safety. Whether you need to schedule heating installation, repair, or maintenance, you can count on Hays. We also provide special offers and financing options for affordability. Call 602-497-2457 or schedule service online to get started.
