Tax Credits
Federal Tax Credits
The U.S. federal government offers valuable tax credits to encourage the purchase of energy-efficient home improvements under the Inflation Reduction Act (IRA) and other federal programs. These tax incentives help homeowners save on the installation of qualifying HVAC systems, such as mini splits and heat pumps, while also promoting environmental sustainability.
Currently, homeowners can receive tax credits of up to 30% of the total cost (including installation) for qualifying energy-efficient air conditioners and heat pumps, with maximum credit amounts varying based on the type of system installed. These credits can be claimed as part of the Federal Energy Efficient Home Improvement Credit.
Incentives under the IRA are set to continue through 2032, giving homeowners ample time to take advantage of these significant savings. This makes it a great opportunity to upgrade to more energy-efficient systems while enjoying reduced energy bills and contributing to a greener environment.
For more information on these tax credits: https://www.energystar.gov/about/federal-tax-credits
Qualifying Products for Tax Credits:
All air conditioners and HVAC systems that qualify for federal tax credits or state rebates must meet or exceed the efficiency standards set by ENERGY STAR®. When choosing an air conditioning unit, look for the ENERGY STAR® label to ensure that it qualifies for these incentives.
Please refer to find ENERGY STAR® certified mini split SKUs:
1. Mini Split Air Conditioners:
G46000642+G46000643
G46000646+G46000647
G46000644+G46000645
G46000648+G46000649
2. Window Air Conditioners:
How ENERGY STAR® Helps You Save:
Lower Energy Bills: ENERGY STAR® certified air conditioners and HVAC systems are designed to use less energy without sacrificing performance. This means you can enjoy a comfortable home environment while saving up to 30% on your energy bills compared to non-certified models.
Tax Credits and Rebates: As part of the U.S. government's push for energy efficiency, many ENERGY STAR® products qualify for federal tax credits, state rebates, and other incentives. By choosing certified products, you may be able to offset the cost of your purchase and installation.
Long-Term Benefits: Investing in ENERGY STAR® certified products not only reduces your immediate utility bills but also helps lower your environmental footprint by reducing carbon emissions. Over time, the energy savings from these products can lead to significant cost reductions, making them a smart investment for any homeowner.
How to Claim Your Tax Credit for HVAC Purchases
If you’ve purchased an eligible energy-efficient HVAC system, such as a mini split or heat pump, you may be entitled to claim a federal tax credit. Follow the simple steps below to ensure you receive your credit.
Step-by-Step Guide:
1. Save Your Invoice
After purchasing your HVAC system, make sure to keep copies of all relevant receipts, including the product purchase and any installation costs. You will need these documents when filing your taxes.
2. Verify Product Eligibility
Confirm that your HVAC system qualifies for federal tax credits. Eligible systems must meet ENERGY STAR® efficiency standards and other specific criteria. You can find more information about qualifying products on our ENERGY STAR® certified products page.
3. Complete IRS Form 5695
To claim your tax credit, you’ll need to fill out IRS Form 5695: Residential Energy Credits. This form allows you to calculate the tax credit for any energy-efficient home improvements, including HVAC systems.
Download IRS Form 5695 directly from the IRS website.
Complete the form by entering the necessary information about your HVAC purchase, including the type of system and the cost.
- Claim the credits using the IRS Form 5695.
- Instructions for Form 5695
- Instructions for Form 5695 (Print Version - PDF)
4. File with Your Taxes
- Once you’ve completed Form 5695, include it with your federal tax return. You may either file the form electronically if using tax software or submit a physical copy if filing by mail.
- If you’re unsure about any part of the process, consider consulting a tax professional who can assist you with claiming your credit.
5. Important Dates
- Be sure to claim your tax credit in the same tax year as your HVAC purchase and installation. The IRS typically sets deadlines for filing taxes, usually by April 15 each year.
- Keep in mind that tax credits may expire or change due to updates in federal policies, so act promptly to take advantage of available incentives.
Important Information to Keep in Mind:
Maximum Credit Limits: For HVAC systems like mini splits, there may be a limit on the total amount of credit you can claim. Be sure to check current guidelines on maximum credit amounts.
Record Keeping: You should retain your documentation, including product certifications and receipts, for several years in case the IRS requests verification of your tax credit claim.
FAQ
1. What qualifies for tax credits?
Tax credits are available for energy-efficient HVAC systems that meet specific federal requirements. Qualifying systems include air conditioners like mini splits, heat pumps, and other ductless units that meet the energy efficiency standards set by programs like ENERGY STAR®.
2. How much can I save with tax credits?
The amount you can save depends on the specific HVAC system you purchase and current federal and state incentives. For most energy-efficient air conditioning systems, you can claim a federal tax credit of up to 30% of the total system cost (up to a maximum limit). Always check the latest tax credit limits and requirements.
3. What is the SEER rating, and why is it important?
The SEER (Seasonal Energy Efficiency Ratio) rating measures the energy efficiency of air conditioners and heat pumps. A higher SEER rating means greater energy efficiency, resulting in lower energy bills and qualifying your system for federal tax credits. To qualify, the SEER rating must meet or exceed minimum efficiency standards, typically around 16 SEER or higher for mini split systems.
The SEER (Seasonal Energy Efficiency Ratio) rating measures the energy efficiency of air conditioners and heat pumps. A higher SEER rating means greater energy efficiency, resulting in lower energy bills and qualifying your system for federal tax credits. To qualify, the SEER rating must meet or exceed minimum efficiency standards, typically around 16 SEER or higher for mini split systems.
4. How do I know if my air conditioner qualifies?
To determine if your air conditioner qualifies for tax credits:
- Ensure it has an ENERGY STAR® certification.
- Verify that it meets the minimum SEER rating required for federal tax incentives.
- Check the product documentation or consult your installer to confirm that it complies with the energy efficiency requirements.
5. Are there installation requirements for tax credits?
Yes, proper installation is essential for ensuring your HVAC system operates efficiently and qualifies for tax credits. Installation must be completed by a licensed professional, and you should retain all invoices as proof. DIY installations may disqualify you from receiving the credit.
6. Can I combine state rebates with federal tax credits?
Yes, in many cases, you can combine state or local rebates with federal tax credits. States often offer additional rebates or incentives for energy-efficient HVAC systems. Make sure to research the specific rebates available in your state and consult with a tax professional to understand how to maximize your savings by combining multiple incentives.