Shedding Light on the Inflation Reduction Act

By: Jason Thomas, Director, Regulatory Affairs, Carrier Residential HVAC

Over the past few months, I’ve been asked nearly every day “What is the Inflation Reduction Act?” or IRA. As we look at the benefits of this legislation, I’m sharing what I know, what we’re still learning and how you can take advantage of saving money by utilizing sustainable solutions.

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What is the Inflation Reduction Act?

The Inflation Reduction Act of 2022 covers a broad spectrum of initiatives, but of particular interest to homeowners is a number of incentives for the installation of high-efficiency home heating and cooling products, including:

$4.3 billion in state-administered rebates on ENERGY STAR(R) certified heat pump equipment
Extension and expansion of tax credits for CEE Highest Efficiency and ENERGY STAR(R) certified equipment

How does it impact you?

The Administration passed the Inflation Reduction Act of 2022 as a means of fighting inflation and investing in domestic energy production while promoting clean energy among other benefits. One beneficial example to highlight is how instrumental this legislation can be in the advancement and adoption of heat pumps. Carrier is investing in the development of new energy-efficient heat pump solutions and has designated our manufacturing facility in Tennessee as a Center of Excellence for high-efficiency heat pump production.

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What is currently included in the Act?

Credits: IRA extends and expands existing 25C and 25D tax credits, a credit toward reducing taxes owed, to homeowners for installing applicable high-efficiency HVAC equipment. Each credit has specific qualification requirements. For a detailed listing of what we know now, visit our Federal Tax Credit page.

At a high level, homeowners can expect:

Up to $600 tax credit for high efficiency air conditioners.
Up to $600 tax credit for high efficiency gas furnaces and boilers.
Up to $2,000 tax credit for high efficiency heat pumps.
Up to 30% for geothermal heat pump systems placed in service during 2022 through 2032, with reduced rebates for 2033 and 2034.

Rebates: While $4.3 billion in rebates or funds provided to the taxpayer even if no taxes are paid, certainly catches your eye, there are a few nuances to keep in mind.

Funding allocation will vary state-to-state and may take some time to get implemented. Your state energy offices will have a fair bit of discretion on how rebates will be used.
Equipment rebates are available only to low-to-moderate income households. Households earning less than 80% of the median income can qualify for the full benefit, while those earning up to 150% of the average median may be eligible for partial (50%) benefit.
Overall energy reduction rebates are available to all homeowners, regardless of income.
Funds are subject to availability and may run out before the 10-year period is over.

How can you benefit from this legislation?

For homeowners, this legislation makes stepping up to a higher efficiency home comfort system more affordable, helping you enjoy exceptional comfort, energy savings and even receive some money back on your investment through tax credits and rebates.

In addition, the Carrier EcoHome™ Program can help homeowners best utilize the longer-term tax credits available, maximize savings and improve sustainability. The EcoHome Program offers special low-rate financing options1 to amplify cost savings available from federal programs and Carrier Cool Cash promotions.

When will we know more?

The Inflation Reduction Act’s higher tax credits took effect Jan. 1, 2023. However, it is still early and more information is slowly becoming available. While IRA rebates will not be available until 2024 for early adopting states, there may be non-IRA utility rebates available in your area. Visit our rebate center to search for local rebates.

Be sure to consult with a qualified tax professional to determine how these credits may apply to your unique situation. As we at Carrier learn more, we’ll be sure to update you here our Federal Tax Credit page.

1 Subject to credit approval. Ask your Carrier Factory Authorized Dealer for details.