What is the Inflation Reduction Act?

Overview: The 25C tax credit program offers tax savings for homeowners with purchases of high efficiency HVAC and water heating products. This includes purchases for heat pumps, water heaters, boilers, and other HVAC products. These upgrades can significantly reduce the utility bill cost of your home.

Financial Incentives by Product: A homeowner can receive a tax credit of 30% for an energy efficiency project. It has an annual limit of $3,200 for the entire tax credit. There is a $2,000 cap for heat pumps and heat pump water heaters, and a $1,200 cap for other qualified energy efficiency improvements, residential energy property expenditures, and home energy audits.

Heat Pump Products: Heat pumps and heat pump water heaters have a separate annual cap for 30% of the project cost up to $2,000 for qualifying product installations.

Non-Heat Pump Products: Insulation, electrical, building envelope, or product upgrade credits are available for up to 30% of the project cost up to a $1,200 annual limit.

The program has the following product specific financial annual limits:

• Qualifying Energy Property, including qualifying gas boilers and water heaters and oil boilers: $600
• Qualifying Windows: $600
• Qualifying Doors: $250 for a single door and $500 total
• Home Energy Audit: $150

Conditions:

• Product Conditions: Qualifying energy property, including heat pumps and heat pump water heaters, must meet the Consortium of Energy Efficiency (CEE) highest tier, but not advanced tier, standards. For air-source heat pumps (ASHPs), the qualifications differ based on geographic region. Please see the qualified product lists for more details. The efficiency standard for oil boilers is detailed in the 25C tax code.
• Time Conditions: This program is available from January 1st, 2023 through December 31st, 2025.

Qualified Products:

• 25C qualified product list for ducted and non-ducted heat pumps (2024) (PDF 0.3 MB)
• 25C qualified product list for R-410A ducted and non-ducted heat pumps (2025) (PDF 0.1 MB)
• 25C qualified product list for R-454B ducted and non-ducted heat pumps (2025) (PDF 0.1 MB)
• 25C qualified product list for gas boilers and water heaters (PDF 0.1 MB)

Source: 26 USC § 25C

Overview: The residential clean energy tax credit program offers tax savings for energy product purchases such as solar panels, battery storage, and geothermal heat pump installations. This program offers significant savings for homeowners when upgrading your HVAC system to geothermal heat pumps.

Financial Incentives by Product: Geothermal heat pumps that meet Energy Star product qualifications can receive a tax credit equal to 30% of the product and installation cost to the homeowner.

Conditions:

• Product Conditions: Qualifying geothermal heat pumps must meet Energy Star qualifications. You can find qualifying Bosch products on the Energy Star Website.
• Time Conditions: This program is available from January 1st, 2023 through December 31st, 2025.

Qualified Products:

• 25D qualified product list for geothermal heat pumps (PDF 0.6 MB)
• Energy Star directory for geothermal heat pumps

Sources: 26 USC § 25D and IRS Fact Sheet 2022-40

Overview: This rebate program is designed for states to provide a point of sale rebate program for electrification projects, which includes heat pump product purchases. While many details are still to be defined by state energy offices and the DOE, the program is intended to support homeowners saving money while installing their electrification projects.

Financial Incentives by Product:

• Low-income households: (<80% of Area Median Income (AMI)): 100% of electrification project costs can be covered
• Moderate-income households (80-150% of AMI): 50% of electrification project costs can be covered
• Maximum cap for program - A homeowner can receive a rebate up to $14,000 per electrification project. This electrification project has the following restrictions:
  • Maximum of $8,000 for a heat pump installation for space heating and cooling
  • Maximum of $1,750 for a heat pump water heater installation
  • Maximum of $840 for an electric stove, cooktop, oven, or clothes dryer
  • Maximum of $4,000 for an electric load service center upgrade
  • Maximum of $1,600 for insulation, air sealing, and ventilation
  • Maximum of $2,500 for electric wiring upgrades
• Please refer to the Department of Housing and Urban Development website to learn more about the AMI for your area.

Qualified Products: Many program details have yet to be defined by state energy offices and the DOE. Currently, qualified products must be Energy Star-rated at a minimum.

Source: Inflation Reduction Act Sec. 50122

Overview: This Inflation Reduction Act program is designed to support energy savings for homeowners. This is done using an open-source building modeling software, which is defined by the states and complies with BPI 2400. This program does not restrict a specific HVAC technology or water heating product type, but a home must model or show a certain percentage of energy is saved to receive a rebate.

Financial Incentives by Product: Any home can receive money from the HOMES program, but if you are less than 80% of the area median income, your rebate amount can double.

• 20-35% modeled energy savings
  • 50% of project cost up to $2,000
• 35%+ modelled energy savings
  • 50% of project cost up to $4,000
• 15%+ measured energy savings
  • Payment per kWh saved up to $2,000

Source: Inflation Reduction Act Sec. 50121