Up To a $2,000 Tax Credit for Heat Pumps & Air Conditioners Installed in 2023

By now most of us have heard about the Inflation Reduction Act which went into effect on January 1, 2023. Included in the act, homeowners can get up to a $2,000 tax credit for heat pumps.

tax credit for heat pumps

What HVAC System Qualifies for a 2023 Tax Credit?

Upgrades to home HVAC (heating, ventilation, air conditioning) equipment entitles homeowners to receive a Federal Tax Credit up to $2,000. To qualify for the tax credit, both the property and new AC unit or heat pump must meet eligibility requirements. The new equipment must also be installed after January 1st, 2023, and before December 31st, 2032.

 

Inflation Reduction Act Tax Credit Property Requirements

To qualify for a tax credit, the new AC unit or heat pump must be installed at your principal (primary) residence. New construction homes and rental properties do not qualify under the provisions of the Inflation Reduction Act.

Both single-family and multi-family homes are eligible. Condos, mobile homes, co-ops, patio homes, and even houseboats all qualify, so long as it’s your primary residence.

 

New AC Units & Heat Pumps That Qualify for a Tax Credit

It’s important to note that not all new AC units or heat pumps qualify for the HVAC tax credit. If you live in the Phoenix, AZ area, schedule an appointment with us if you’re considering replacing your HVAC system.

Our Project Managers are very knowledgeable about which models meet eligibility requirements and can answer any questions you may have. If you live outside of the Phoenix, AZ area, we recommend you consult a local air conditioning & heating company.

 

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Eligibility Requirements & Maximum Tax Credit by Equipment Type

 

Heat Pumps Qualify for up to $2,000 Tax Credit

Air Source Heat Pumps (the type installed in most Arizona homes) are eligible. You’re allowed to claim 30% of the total project cost, up to $2,000 maximum. Installed heat pumps must meet or exceed the following efficiency ratings*:

 

Central (Ducted) Split Heat Pumps

  • SEER2 rating of 15.20 or higher
  • EER2 rating of 11.70 or higher
  • HSPF2 rating of 7.8 or higher
  • Energy Star certified

 

Packaged Heat Pumps (Rooftop or Ground Mount) 

  • SEER2 rating of 15.20 or higher
  • EER2 rating of 11.50 or higher
  • Energy Star certified
  • Gas Packs aka Packaged Gas/Electric (gas heating with electric cooling) meeting or exceeding the above efficiency ratings also qualify.

 

Mini Split Ductless Heat Pumps

  • SEER2 rating of 16.00 or higher
  • EER2 rating of 12.00 or higher
  • HSPF2 rating of 9.0 or higher
  • Energy Star certified

 

 

Central Air Conditioners Qualify for up to $600 Tax Credit

Central air conditioners (electric air conditioners with gas heat or electric strip heat) are eligible. You’re allowed to claim 30% of the total project cost, up to $600 maximum. Installed air conditioners must meet or exceed the following efficiency ratings:

 

Central Air Conditioning (Ducted) Split Air Conditioners

  • SEER2 rating of 16.00 or higher
  • EER2 rating of 12.00 or higher
  • Energy Star certified

 

Packaged Air Conditioners & Gas Packs (Rooftop or Ground Mount)

  • SEER2 rating of 15.20 or higher
  • EER2 rating of 11.50 or higher
  • Energy Star certified

 

 

HVAC TAX CREDIT QUICK REFERENCE CHART*

 

*Regional Standards for South Region (including Arizona)

 

Tax Credit Equipment Type SEER2 EER2 HSPF2
 

Up to $2000

 

Heat Pump

Split HP 15.2 11.7 7.8
Ductless HP 16.0 12.0 9.0
Packaged HP 15.2 10.6 7.2
 
 

Up to $600

Air Conditioner Split AC 16.0 12.0 N/A
Packaged AC 15.20 11.50 N/A

 

 

Understanding Air Conditioner Efficiency Standards

Last summer I published an article named Air Conditioner Efficiency Standards which explained changes to the standard taking place 1/1/2023. In the article, I included a helpful chart showing the former efficiency standard and the new standard for 2023. Note, as Magic Touch Mechanical installs heat pumps & air conditioners in Arizona, that article is specific to regional standards in our service area.

 

HVAC Tax Credit Frequently Asked Questions

 

Q: Will I get a tax refund check from the IRS if I buy a heat pump or air conditioner that qualifies?

A: A federal tax credit and a tax rebate of refund are not the same. To receive a tax credit, you must owe federal tax. If you do not owe any federal tax, you will not get a refund.

Example: If you owed $3,000 in federal tax and qualified for a $2,000 tax credit, you would now only owe $1,000.

 

 

Q: I bought a new air conditioner in 2022 that meets the requirements but was installed before 1/1/2023, can I still get the tax credit in the Inflation Reduction Act?

A: No, only equipment installed on or after 1/1/2023 qualifies for the provisions in the Inflation Reduction Act. However, you may still qualify for Non-Business Energy Property Tax Credits. More information can be found here: https://www.energystar.gov/about/federal_tax_credits/federal_tax_credit_archives/2022_tax_credit_information

 

 

Q: Do I need to fill out any special forms to receive my credit?

A: Yes. To receive your credit, you must submit IRS Form 5695 and include it with your tax return. We highly recommend you consult your tax professional as we’re experts in HVAC but lousy tax advisors!

 

 

Q: I’m a snowbird and I live in more than one home; how do I know which qualifies as my principal residence?

A: Per the IRS: “THE PRINCIPAL RESIDENCE OF A TAXPAYER IS DETERMINED BY TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES, SUCH AS THEIR PLACE OF EMPLOYMENT AND MAILING ADDRESS FOR BILLS AND CORRESPONDENCE, BUT ORDINARILY WILL BE THE PROPERTY WHERE THE TAXPAYER SPENDS THE MAJORITY OF THEIR TIME. TREAS. REG. § 1.121-1(B).”

 

Q: What company is the best air conditioner & heat pump installer in Phoenix and surrounding cities?

A: Okay, we were just testing to see if you were still reading – but since you asked, the answer is most definitely Magic Touch Mechanical according to our clients!

 

 

 

 

magic touch mechanical ac - there's magic in the air

 

about the author rich morgan

Author: Rich Morgan, CEO Magic Touch Mechanical

 

 

 

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Magic Touch Mechanical

942 West 1st Avenue
Mesa, AZ 85210
United States (US)
Phone: 4808558789
Email: Info@MagicTouchAir.com

There's Magic in the Air!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax Credit