Inflation Reduction Act

Here’s why Garden City property owners should care about the Inflation Reduction Act of 2022.

It’s an opportunity.

Signed into law in August 2022, the Inflation Reduction Act (IRA) provides tax credits and rebates to encourage Michigan homeowners to replace older appliances with high-efficiency equipment that does a better job at a lower operating cost.

How to Take Advantage of the Inflation Reduction Act

Sharon's Heating & Air Conditioning can help pinpoint areas in your home or business where you can save money and reduce your carbon footprint, allowing you to use the best tax credits and rebates.

HVAC Tax Credits Homeowners Can Claim

The Inflation Reduction Act extends and expands the existing Energy Efficient Home Improvement Credit (Section 25C) and the Residential Clean Energy Credit (Section 25D) to homeowners.

Projects installed between January 1, 2023, and 2032 quality for a 30 percent tax credit:

• Air Conditioners—Tax credit capped at $600
• Heat Pumps—Tax credit capped at $2,000
• Furnaces and Boilers—Tax Credit capped at $600
• Geothermal Systems—Uncapped 30 percent tax credit on purchase and installation
• Solar Paneling—Uncapped 30 percent tax credit on purchase and installation

If you installed rooftop solar in 2022, it is eligible for the new, 30 percent 25D tax credit. If you installed a heat pump in 2022, it is eligible for the old 25C tax credit, or 10 percent of costs up to $300.

Here is a closer look at HVAC products and eligibility requirements:

• All ducted air-source heat pumps with the ENERGY STAR® label qualify.
• Split air conditioner systems must have a Seasonal Energy Efficiency Rating (SEER2) of 16 or more. All packaged systems with ENERGY STAR certification are eligible.
• Gas furnaces must have an annual fuel utilization efficiency (AFUE) rating of at least 97 percent.
• Gas boilers with an AFUE of at least 95 percent qualify.
• Oil-fueled boilers and furnaces must be capable of using fuel blends.

HVAC Rebates

The Inflation Reduction Act set aside a $4.3 billion budget, with the money allocated to individual states for disbursement. Funding will vary from state to state, and eligibility is income-based.

For example, the High-Efficiency Electric Home Rebate Act covers 100 percent of electrification project costs (up to $14,000) for low-income households and 50 percent of costs (up to $14,000) for moderate-income households.

Here’s how some of those rebates would work:

• $8,000 for a heat pump for space heating
• $4,000 for an upgraded breaker box
• $2,500 for upgraded electric wiring
• $1,750 for a heat pump water heater
• $1,600 for insulation, air sealing, and ventilation
• $840 for an electric stove, cooktop range, or oven
• $840 for an electric clothes dryer

The rebate program is not available to all households. Because the funds are being allocated to state offices, and each state gets to decide to a certain degree how to distribute the money, it will take some time to fully implement the rebate program.

The tax credits, in contrast, are in place right now and will continue to be for the next decade.

Buy Now and Save

Upfront costs are typically the biggest obstacle to upgrading your heating and cooling system. The Inflation Reduction Act of 2022 overcomes that barrier.

Water Heaters (Natural Gas) Tax Credit

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

What products are eligible?

Gas storage water heaters
ENERGY STAR certified models are eligible as follows: > 0.81 UEF for tanks less than 55 gallons and > 0.86 UEF for tanks greater than or equal to 55 gallons.
Tankless gas water heaters
ENERGY STAR models with > 0.95 UEF are eligible.