A Quick Guide to Federal Tax Credits & Rebates

  1. Federal Tax Credits (2023 – 2032) – HVAC Specific

    1. What is a tax credit and how is it different from a rebate and/or a tax reduction? (from https://www.cleanenergyresourceteams.org and www.NerdWallet.com)
      1. A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. You claim a tax credit as part of your annual tax return. So, if you make a purchase in 2024, you will claim the tax credit on your 2024 tax return which you would file in 2025. You must have a tax appetite to take advantage of the tax credit. This means, your taxable income is equal to or more than the amount of the tax credit. Your taxable income is your gross earnings (money, property, or services you earn through work, investments, and other means) minus available deductions and exemptions. See below for the qualifications of the federal tax credits currently available.
      2. A rebate is an upfront discount that gives you cash back after you make a purchase, and typically more quickly than a tax credit. A point-of-sale rebate gives you that cash back when you make the purchase, effectively reducing the cost of the item purchased. Rebates do not rely on income levels to receive the benefit.  Depending upon your eligibility for each, you can, in some circumstances, claim both. The ONLY HVAC rebate we currently have available is through the Duke Power Super $aver program.  See below for details
      3. Tax deductions, on the other hand, reduce how much of your income is subject to taxes. Deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction saves you $220. There’s currently NO HVAC tax deductions available.
    2. General rules & requirements for the federal tax credits.
        1. This tax credit includes the following home improvements:
          1. Total annual credit capped at $1,200, with a separate annual $2,000 limit for heat pumps.
          2. $2000 for a ducted or non-ducted (ductless mini-split) heat pump.
          3. $600 for an air conditioner.
          4. $600 for a furnace.
          5. $600 for a packaged unit.
          6. $2600 for dual fuel systems.
        2. Tax credits only apply to primary residences
        3. Tax credits equal to a maximum of 30% of installation costs (max. of $2000).
        4. Labor costs are included in the total.
        5. Must be installed between January 1, 2023 and December 31, 2032 (and while there’s still money there to be credited).
        6. The maximum credit you can claim each year is:
          1. $1,200 for energy property costs and certain energy efficient home improvements (includes up to $600 each for air conditioners, furnaces, and packaged units), with limits on doors ($250 per door and $500 total), windows ($600) and home energy audits ($150).
          2. $2,000 per year for qualified heat pumps, biomass stoves or biomass boilers.
        7. The credit has no lifetime dollar limit. You can claim the maximum annual credit every year that you make eligible improvements until December 31, 2032.
        8. The credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes.
        9. You can NOT apply any excess credit to future tax years.
        10. Who Qualifies:
          1. You may claim the energy efficient home improvement credit for improvements to your main home. Your main home is generally where you live most of the time.
          2. For the energy efficiency home improvement credit, the home must be:
            1. Located in the United States.
            2. An existing home that you improve or add onto, NOT a new home.
            3. In most cases, the home must be your primary residence (where you live the majority of the year). You can’t claim the credit if you’re a landlord or other property owner who doesn’t live in the home.
        11. Business Use of Home:
          1. If you use a property solely for business purposes, you can’t claim the credit.
          2. If you use your home partly for business, the credit for eligible clean energy expenses is as follows:
            1. Business use up to 20%: full credit.
            2. Business use more than 20%: credit based on share of expenses allocable to nonbusiness us
        12. Please see your tax advisor for a full list of details and qualifications!

HVAC Specific Federal Tax Credits Matrix (2023 – 2032)

25C Tax Credits

Equipment Type

Style of Equipment

Required SEER2

Required EER2

Required HSPF2

Other Req’s

Up to $2,000

Heat Pumps

Split Ducted Heat Pump




Non-Ducted Heat Pump




Packaged Heat Pump




Up to $600


Split A/C



Packaged A/C



Up to $600

Natural Gas or Propane Furnaces

Gas-Fired Forced Hot Air

≥97% AFUE