Capitalizing on The Inflation Reduction Act: Tips for Purchasing a New AC Unit
Summer’s almost here, and like most years, it seems that spring comes and goes in a flash. Soon, the warm spring weather turns hot and humid practically overnight. Don’t sweat uncomfortably another year. Buy a new air conditioner using benefits that are available through the Inflation Reduction Act.
Summer is on its way, and with it comes the rising need for a cool and comfortable home. But this year, buying a new air conditioning unit can be a smart financial decision thanks to the Inflation Reduction Act. This article will guide you through the Act’s benefits and provide tips to maximize your savings when purchasing a new energy-efficient AC unit.
What Does the Inflation Reduction Act Mean For You?
For so many decades, Americans have relied on petroleum products and coal for everything from driving a car to heating or cooling a home. With all of this fuel and oil consumption, the greenhouse effect happened and damaged the ozone layer. Global warming is here and it’s not going to stop without help.
Icebergs are melting. Severe weather is happening more. To counter this, the Inflation Reduction Act was passed in 2022. It appropriated $11.7 billion in loans and grants to help improve the nation’s infrastructure and improve the energy infrastructure. The Clean Energy Financing Program is part of it.
When you take strides to embrace alternative energy and lower your energy consumption, you get your money back. When you help do your part and embrace clean energy that reduces carbon emissions everyone wins, including you.
All homeowners qualify for up to 30% in tax credits for certain expenses.
- $2,000 per year for qualified heat pumps, biomass stoves, and biomass boilers
- $1,200 per year on energy-efficient home improvements ($150 for home energy audits, up to $500 on new doors, up to $600 for new windows, and up to $1,200 for insulation)
This $3,200 tax credit is available yearly until January 1, 2033. You can make improvements however you want, but you can only claim a maximum of $3,200 per year, and you cannot claim the full credit if it’s more than you owe in taxes. There’s no way to apply an excess credit to other years.
There are rules for qualifying. You need to be located in the U.S. The credits must be applied to your older home and not a new construction. That home has to be your primary residence, and you must own the property. You cannot be a landlord. Finally, your home cannot be used solely for business. If you run a business from part of your home, the credit drops to 20%.
To claim the 30% tax credit, you need to fill out Form 5695 with your yearly tax return. You’ll need the invoice for the equipment and installation costs. To fill out the form, you want to answer these questions.
- Fill out your home’s legal address.
- Enter the cost of any qualifying alternative energy projects or fuel cells, and calculate your clean energy credit, if applicable.
- Move to Part II and answer the questions on your energy efficiency improvements.
- Enter your home’s legal address again.
- Enter the financial information on the projects you completed, such as new doors, insulation, etc.
- Go to Section B to enter information about the cost of central AC systems, energy-efficient heating systems, and water heaters. If you had a heat pump installed, skip forward to the heat pump section and fill in the blanks asking about the cost of installation.
- Complete the math to get your total energy-efficient home improvement credit.
If you use tax software, which is ideal, it’s a lot easier as the software does all the calculations for you.
What Is the Best Air Conditioner For Your Home?
When it comes to an air conditioner, there are window units, mini-splits, and central AC systems. Heat pumps and central AC systems are the options to consider as you can qualify for the federal tax credit when you have one installed by a professional HVAC company.
A heat pump is an energy-efficient system that’s about 4x more efficient than an electric or gas furnace. They use electricity to absorb heat from inside the home in the summer. It then removes that heat to the outside and circulates the cooler air inside. In the winter, it does the opposite and draws any heat energy from outside the home and brings it inside to heat the area of the home it’s in.
It entails having a small wall-mounted system inside that’s collected through one refrigerant line to outside the home. Because it’s localized to the room you’re in, there is no need for ducts.
A central AC system has two main components. The condenser is outside the home, and the compressor is inside. A refrigerant line travels between the two bringing hot inside air to the outside through the coolant, and bringing back in cooled air where fans blow it into the ducts and around the home. This system is better if you want whole-home cooling.
Current ComEd discounts on centrally ducted mini-split systems are up to $1,400. Mini-split heat pumps without ducts qualify for discounts of up to $1,000 with ComEd. You must work with a qualified contractor, and Air Blue Heating & Cooling is one of the preferred heat pump contractors for ComEd.
You might prefer a traditional central AC system. There are tax incentives on those, too, but it must “meet or exceed the highest efficiency tier established by the Consortium for Energy Efficiency.” You can claim up to 30% of the AC cost or $600 maximum.
Consider pairing your new AC with an ENERGY STAR® certified smart thermostat. ComEd is offering a $75 instant rebate when you purchase the thermostat through the ComEd marketplace.
Make Sure You Work With a Qualified Contractor
It’s important to work with a qualified contract. First, this protects the warranty. If you attempt an installation as a DIY project, you’ll often learn from the fine print that only systems installed by a professional HVAC technician are covered under the warranty.
Second, it ensures you get the maximum possible credit. HVAC technicians know the full range of possible rebates and tax incentives. Some of the rebates you qualify for require the installation to be done by a professional.
Use benefits available through the Inflation Reduction Act and local electric companies to save money on a new AC. With an energy-efficient AC system, you also gain the benefit of lower electricity bills each month.
Air Blue Heating and Cooling is here to help you have a cool home this summer at great savings. Ask us about our instant discount of $150 off a new AC installation. It’s in addition to any electricity company and federal tax incentives you qualify for.
