The IRA and You: A Dive Into how it Affects Your HVAC Decisions in 2023

January 20, 2023
HVAC Installation in Kansas City, MO

The Inflation Reduction Act, IRA, that was signed on August 16th 2022 has the potential to create great benefits that may influence your HVAC decisions in the coming years. There are several different programs which can be quite confusing. Along with program guidelines, the program’s timelines are also not clearly defined. We are going to go over the 3 main programs for HVAC that this Act includes and rough timeframes on when we can expect movement in the program creation and implementation.

Bigger and Better Federal Tax Credits!

You may not have realized it, but there has been a Federal Tax Credit for over a decade for purchasing highly efficient equipment for your home. The previous tax credit was for up to a $500 credit for purchasing a highly efficient system for your home. However, this credit has been allowed to expire several times. Not only did the IRA extend this tax credit through December 31st, 2022, but it increased the credit for equipment installed between January 1st 2023 and December 31st 2034. The credit is increased to $600 for 96% and above furnaces, and $600 for a 16 SEER2 or 17 SEER Air Conditioner. Because the program is designed to incentivize electrification, if you decide to install a 16 SEER2 Heat Pump, you will receive a $2,000 tax credit, with a max credit of $2,000 for HVAC.

If you want to consider a solar panel installation of any type, the Federal Tax Credit that was supposed to go down to 22% in 2023 went back to the plan’s original credit of 30% for qualifying homeowners. This is all fantastic news for homeowners who are interested in purchasing HVAC equipment that will improve their home’s comfort and efficiency. The best news is that this program is now in effect.

Program Recommendations For HEEHRA

The first new program the IRA created is the High Efficiency Electric Home Rebate Act, or HEEHRA, designed to both allow and incentivize low to moderate income homeowners to purchase highly efficient heat pumps instead of standard heat pumps or gas furnaces. It’s scaled according to income for low- and moderate-income households. This rebate is based on household income for an area, which is $97,300 for the Kansas City Metro. Rebate coverage of the heat pump’s cost can be:

  • Below 80% of median income: recommended qualifying heat pump rebate of up to $8,000
  • 81-150% of median income: recommended qualifying heat pump rebate up to $4,000

For purchasing homeowners, the best part of this program is that this rebate will be a point-of-sale rebate, meaning that our Comfort Experts will be offering this rebate at the kitchen table. Homeowners will not have to be out of pocket or required to finance the rebate portion of this investment. This will allow many more people access to highly efficient equipment that used to be financially unavailable to them.

Program Recommendations for HOME

The second rebate program offered by the IRA is called the HOME Rebate. This program is primarily a performance-based incentive determined by the level of increased energy savings your project yields. In order to participate in this program, your new system must create an energy savings of 20% to 35% to receive a $2,000 rebate. If your heat pump system created a savings of over 35%, then you receive a $4,000 rebate. To further incentivize low to moderate income households to participate in the program, it allows that if you are less than 80% of our Area Median Income of $97,300 (or $77,840) your rebate DOUBLES. Another great benefit of this program is that it would not prohibit filing for the HVAC Federal Tax Credit of up to $2,000.

Design and Timeframe of the Program

The federal government has recommended that this program be a point-of-sale rebate program. This brings a lot of complications to it, which lengthens the timeframe of the construction and implementation of these programs. These programs are given to states as grants. The states will create programs, fund them with the federal money, make the rules and distribute the funds through the program to contractors who apply for the programs for their customers. States have until mid-summer 2023 to apply for these grants. The act states that the funds must be distributed within 2 years of the Bill being signed or August 16th, 2024. The state must have the funds in order to create and distribute the funds. Industry wide, it is not expected for any of these funds to be available in 2023. In reality, it would be optimistic to think that they would be available by late spring 2024. It is also likely that programs will differ from state to state. The guidance that has been disseminated by the act and the federal government, are just that, guidance. States are not required to follow the recommendations by the federal government. They are maximums, so program details are expected to vary. States will release their programs at different times, which will certainly frustrate late adopter states. At the time that this article was created, Missouri has offered its letter of intent to participate in the program, however Kansas has not.

As the country continues to convert to green energy solutions, homeowners need to consider maximizing the efficiency of their home and appliances, especially their heating and cooling equipment. The recently adopted SEER2 rating system is one more step toward a more real-world application of standards. The “M1” standard is a different way of measuring true efficiency, which has resulted in the DOE increasing the minimum efficiency standard. This has caused another increase in the cost of equipment. So, the timing of these rebate programs is helpful to homeowners who otherwise could not have been able to afford higher efficient HVAC systems to reduce the cost of operation and the increased in-home comfort more efficient systems provide.

Bringing You Up to Speed on Heat Pumps

The topic of heat pumps can be very confusing to most people. How can a condenser that is outside produce heat? The truth is that it’s a simple concept. These systems are heat rejection machines. An air conditioner absorbs heat from inside the home and moves it through the refrigerant lines to the condenser. The condenser has a fan that blows air across the coil and removes the heat from the condenser. The absence of heat creates a colder, less humid, climate. A heat pump does the exact same thing, just in either direction, pushing the heat in or out. It can reject heat into the home.

Our Expert System Installation

The most important day in the life of your heating and cooling equipment is the day it is installed. According to Consumer Reports “70% of how well your HVAC equipment works is the installation.” Summit Heating and Cooling prides itself on being a best practices company, meaning we install our systems according to manufacturer’s recommendations and industry best practices. You cannot do better than trusting the Summit team to install your new equipment to the highest quality standards in the industry. Allowing your system to operate at its best, most efficient manner, and last as long as possible.

reach Out to Us for More Information

At Summit Heating and Cooling our professionals are here to answer all your questions about the new IRA rebate programs, Federal Tax Credits, utility rebate programs, and HVAC equipment for you and your home. Whether its maintenance, service, or the installation of a new system, our team is trained to answer all your in-home comfort questions. Our fantastic Comforts Experts can design your new system to balance reliability, energy efficiency, and comfort within a budget that you will be comfortable with. We are Kansas City’s most consistent and trustworthy HVAC contractor. Remember, if you are looking for the top, Reach for the Summit!

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