HEXAGON USA LLC
Houston
713.HEXAGON
713.439-2466
open hours
Mon - Fri
7am to 7pm CST
24|7 Emergency Service
Address
P.O. Box 27191
Houston, TX 77227
HEXAGON USA LLC
Houston
713.HEXAGON
713.439-2466
open hours
Mon - Fri
7am to 7pm CST
24|7 Emergency Service
Address
P.O. Box 27191
Houston, TX 77227
As part of the Federal Govt’s Inflation Reduction Act (IRA), the newly revised 25C Federal Tax Credit for Residential Energy Property becomes effective for work completed beginning January 1st, 2023.
A standout feature in the IRA is that is makes an exception for heat pumps used for heating by making a tax credit available to homeowners that is 30% of the cost of the installation up to $2,000. To give you some idea of how significant this is, the maximum federal tax credit for a a central AC system is $600 in the IRA (double what it was). Also, just to clarify, a tax credit – unlike a “tax deduction” – represents a dollar for dollar reduction of one’s federal tax bill. That is, if the total federal tax you owe for the year without the tax credit is is $10,000, a $2,000 federal tax credit will reduce your tax bill to $8,000. It’s like having the federal government pay $2,000 towards your new heat pump system!
H.R. 5376 of 2022 modified the value of this tax credit, making it 30% of the cost of an item or improvement. Each item or improvement has a separate tax credit cap as shown below, and a taxpayer cannot claim more that $1,200 in total tax credits per year, except as specified.
Building Envelope Improvements
Owners of existing homes may receive a tax credit worth 30% of the cost of upgrading the efficiency of the building’s envelope. Installation (labor) costs are not included and, the improvement must meet the specified efficiency standards. The following improvements are eligible for the tax credit:
Qualified Energy Property
Taxpayers who purchase qualified residential energy-efficient property may be eligible for tax credit. The equipment must meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year in which the equipment is placed in service, and/or any additional standards specified below. The credit is equal to 30% of the cost of the equipment. Note, heat pumps, heat pump water heaters, and biomass stoves have caps that exceed the otherwise $1,200 cap for this credit:
