With the signing of the Inflation Reduction Act by President Joe Biden on August 16, 2022, comes questions of what the new legislation means for homeowners. To better understand how you can save money, while making your home more energy efficient, let’s break down what the Inflation Reduction Act is and how the programs work.
What is the Inflation Reduction Act?
The Inflation Reduction Act is a $740 billion climate and health care bill that aims to put the U.S. on a path to emissions reduction by investing in climate protection. According to the Committee for a Responsible Federal Budget – a bipartisan, non-profit organization – the Act includes $386 billion of climate and energy spending and tax breaks to promote clean energy generation, electrification, green technology retrofits for homes and buildings and greater use of clean fuels, among other purposes.
How Can the Inflation Reduction Act Save You Money?
As part of the Inflation Reduction Act, you will have access to cost-saving options for purchasing energy efficient and electric appliances or making home improvements to electrify your home or increase its energy efficiency. Benefits include rebates to low and moderate income households for installing heat pumps. They also include energy efficiency improvement tax credits for installing Consortium for Energy Efficiency (CEE) highest efficiency tier HVAC equipment.
Energy Efficiency Home Improvement Tax Credit (25C)
The renewed Energy Efficient Home Improvement Credit (25C) increases the tax credit limit to 30% of the total cost for installing CEE Top Tier high efficiency equipment, such as heat pumps, central air conditioning systems, furnaces, hot water boilers and more, and extends the offering through 2032. The 25C credit has an annual cap of $1,200 – including up to $600 for qualified air conditioner or gas furnace – or up to $2,000 with a qualified heat pump, heat pump water heater or boiler. The 25C credit applies to eligible equipment installed on or after January 1, 2022. There are no income requirements for this tax credit and it cannot be combined with other federal programs such as the HEEHRP. To download a qualification certificate for equipment installed after January 1, 2022, visit our Federal Tax Credits page.
Eligible equipment includes:
- Heat pumps and heat pump water heaters
- Energy-efficient HVAC systems (including furnaces, boilers, and central AC)
The 25C credit has an annual cap of $1,200 (except heat pump):
- Up to $600 each for a qualified air conditioner or gas furnace
- Up to $2,000 with a qualified heat pump, heat pump water heater, or boiler
High Efficiency Electric Home Rebate Program
Effective January 1, 2022, the High Efficiency Electric Home Rebate Program (HEEHRP) provides up to $14,000 in direct consumer rebates for families to buy heat pumps – a heating and air conditioning system that works year-round to keep you comfortable – or other energy-efficient home appliances, saving eligible families at least $350 a year on utility bills. For Energy Star-certified heat pumps, installation rebates can total up to $8,000. Household income qualifications for the heat pump installation rebate are as follows:
Up to 100% of the total cost if income is less than or equal to 80% of area median income
Up to 50% of the total cost if income is greater than or equal to 80% but less than or equal to 150% of area median income
To locate the median income in your area, visit HUD USER.
The effective dates and funds available will vary by state. $9 billion will be available to states and Tribes from the Inflation Reduction Act for consumer home energy rebate programs. The DOE anticipates that the state level programs will be operational as early as Spring 2023. View allocation by state here.
Rebates are also available to upgrade electrical panels (up to $4,000 rebate), insulate and seal a house (up to $1,600 rebate) and to improve home electrical wiring (up to $2,500 rebate).
“Heat pumps revolutionize the HVAC industry by providing an all-in-one heating and cooling solution that work in all seasons, while significantly lowering greenhouse gas emissions,” said Tim Brizendine, Director of Product Management – Cooling Products at Lennox International.
To qualify for the High Efficiency Electric Home Rebate Program, your household income must be less than or equal to 150% of the area median income.
Overall, the rebate program allocates $4.5 billion to states for home energy improvement projects. Rebates and funding will be handled on the state level, not by individual HVAC manufacturers or dealers. The duration of the program will depend on the amount of funds available within each state and the number of rebates distributed.
HEEHRP provides HVAC rebates up to $14,000 per household, including:
- Up to $8,000 for installing Energy Star qualified heat pumps
- Up to $4,000 for electrical panel upgrades
- Up to $1,600 for home insulation and sealing
- Up to $2,500 for home electrical wiring improvements
Eligibility and the amount of the rebate depends on household income:
- For households below 80% of area median income, 100% of the system purchase price qualifies for the rebate.
- For households that fall within 80% to 150% of area median income, 50% of the system purchase price qualifies for the rebate.
- Households above 150% of area median income do not qualify for the HEEHRP rebate.
How Does Lennox Fit In?
With the new rebate program and extended tax credits, there’s no better time for you to learn more about the Lennox lineup of innovative, energy-efficient home comfort solutions.
Lennox leads the market in super high efficiency equipment. All Dave Lennox Signature Collection® products in the Ultimate Comfort System™ qualify for the tax credit and Lennox offers a broad assortment of Energy Star qualifying heat pumps for the rebate program.
“For 127 years, Lennox Industries has built a legacy of manufacturing and distributing high-performance, energy-efficient products centered on environmental sustainability,” said Quan Nguyen, VP and General Manager, Lennox Residential.
Earlier this year, we debuted the Dave Lennox Signature® Collection model SL25XPV heat pump – the most precise and efficient heat pump on the market, now with Lennox TruHeat Performance – delivering on our commitment to provide whole-home comfort through perfect air.
As Lennox continues to lead the advancement of heat pump technology, we were recently recognized by the U.S. Department of Energy for being the first HVAC manufacturer to prototype a next-generation electric heat pump that can effectively heat homes in extreme cold climates. This new technology will push the industry forward in energy efficiency and cost savings for homeowners.
Where Can I Learn More?
To learn more about how you can take advantage of the energy efficiency rebate programs and expanded tax credits resulting from the Inflation Reduction Act, as well as energy-efficient comfort solutions for every season, visit Lennox.com/locate to find a Lennox dealer near you.
For information on how to save on utility bills and receive tax credits for energy-saving appliances in your state, check out these Fact Sheets from The White House. For more on how to utilize available tax credits, contact your tax professional for information.