If you’re looking to replace a large appliance in your home and have researched replacements, you may have seen some items listed as ENERGY STAR certified. You may even have ENERGY STAR appliances in your home already. It’s clearly a selling point, but what actual benefits do you get as a homeowner if you purchase an appliance with an ENERGY STAR sticker? The truth is that installing an ENERGY STAR appliance can be a smart financial move since it can allow you to qualify for tax rebates.
Kalos can install ENERGY STAR-certified heat pumps and water heaters, so we’re going to explain the tax savings you can get specifically for those types of appliances. We’ll also explain how to claim your tax rebate if you choose to have Kalos install an eligible new heat pump or water heater.
The Inflation Reduction Act (IRA) and Heat Pumps
The Inflation Reduction Act was signed into law in August 2022. One of its provisions was a tax rebate for Americans who replace old appliances with new ones that use efficient heat pump technology. Unlike gas-fired appliances like furnaces and gas water heaters, heat pump technology uses electricity to move heat from one place to another. These are generally safer because they don’t burn fuel inside the home or come with the risks of flame rollout and carbon monoxide poisoning.
The tax rebate is for 30% of the installation project cost, up to $2000, per year whenever you install a new heat pump in place of an existing A/C system or furnace. The same applies when you replace your gas or heat pump water heater with a new energy-efficient heat pump water heater. There are a number of other tax rebates for energy-efficient home improvements, and Americans can claim an additional $1200 for energy-efficient upgrades to windows, doors, and insulation. In total, the IRA allows homeowners to receive up to $3200 in tax rebates for eligible home improvements.
This law took effect in January 2023 and will grant homeowners tax rebates through December 2032.
Which Appliances Qualify?
Only replacements qualify for the tax rebate. The heat pump or water heater must replace an existing HVAC system or water heater and will not be eligible in a new construction home or if it will be the first HVAC unit or water heater in a home’s history. You must also live in the home as your primary residence; energy-efficient heat pump appliances installed in rental and vacation properties that you don’t live in as your primary residence don’t qualify.
Different regions of the USA (North and South) have different qualifications. Since we’re in the South, any ducted air-source heat pump with the ENERGY STAR label qualifies for this tax rebate.
Some ductless systems may also qualify, but they need to be ENERGY STAR-certified and meet a few minimum energy efficiency ratings. These ratings should be available in the product information of each appliance. Here are the qualifying criteria for ductless heat pumps:
- SEER2: ≥16
- EER2: ≥12
- HSPF2: ≥9
Any heat pump water heater with the ENERGY STAR label will apply for tax rebates.
If you choose to have Kalos install your replacement heat pump or water heater, our sales team can tell you if an appliance is ENERGY STAR-certified and if it qualifies for the tax rebate.
How Can I Claim My Tax Rebate?
Once you’ve had your replacement heat pump or water heater installed, keep all invoices for costs associated with the installation. You can sit tight until it’s time to file taxes for the year during which it was installed. When tax season comes, you can download and fill out Form 5695. The IRS has full instructions for filling out this tax form, and the ENERGY STAR website has a link to the form as well.
ENERGY STAR-certified replacement heat pump appliances count as “Energy Efficient Home Improvement Credits” in Part II of the form. Section 1 of Part II deals with changes to insulation, windows, skylights, doors, and more. Again, you could be eligible for up to $1200 annually in tax rebates for those types of improvements, but we really want to focus on Section 2 of the form. You can check boxes to determine your eligibility, enter your address, and follow the instructions.
You can learn more about ENERGY STAR tax rebates, download Form 5695, and learn about other home improvements that can earn you tax rebates by visiting https://www.kalosflorida.com/energystar. If you have any questions about replacing your old HVAC unit or water heater with a new heat pump appliance, please call or text us 24/7 at (352)-243-7099, and one of our customer service representatives would be happy to answer any questions you may have or set up a time for our sales team to come out and prepare a quote.
