Inflation Reduction Act
and High Efficiency Electric Home Rebate

You might be asking yourself how this program actually works. It’s quite simple for homeowners who invest in qualifying energy-efficient HVAC systems after Jan. 1, 2023. They could be eligible to receive a tax credit of up to $2,000 per year for qualified heat pumps, water heaters, biomass stoves, or biomass boilers. If applicable, you can claim this credit made through 2032. However, the process is slightly more complicated for those who invested in such improvements before 2023. It involves filling out a form provided by the Internal Revenue Service (form 5695).

As of Jan. 1, 2023, the credit equals 30% of certain qualified energy-efficient HVAC improvements installed during the taxable year. It’s important to note that there are limits on the allowable annual credit and the amount of credit for certain types of qualified expenses. You can claim the Energy Efficient Home Improvement Tax Credit for qualifying systems in operation on or after Jan. 1, 2023, and before Jan. 1, 2033. The credit has no lifetime dollar limit, meaning you can claim the maximum amount every year you make eligible improvements or install energy-efficient equipment until 2033.

However, beginning in 2025, no credit will be allowed for each qualifying system unless a qualified manufacturer produced the system and the taxpayer reports the PIN for the item on their tax return. Unfortunately, the Energy Efficient Home Improvement Tax Credit is nonrefundable. This means you can’t get more money back from the credit than you owe in taxes, and you can’t apply any excess credit to your taxes in future years.