On August, 16, President Joe Biden signed the Inflation Reduction Act (IRA) into law. The estimated $737 billion measure could mean thousands of dollars to improve building efficiency. The Act aims to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions. It’s projected to reduce carbon emissions by roughly 40% by 2030. Barton James, ACCA president and CEO said that Congress (or at least the Democrats) believe HVAC contractors are the key to making major efficiency changes and therefore, the key to moving the U.S. away from fossil fuel usage in homes.

While the overall legislation of the IRA had both supporters and resisters within the HVAC industry, one aspect that may prove beneficial is that contractors can leverage the tax credits when selling system upgrades to their customers.

An Opportunity

According to CNET, many American homeowners can get up to $14,000 for energy efficiency improvements, not including the increased solar tax credit. Depending on where they live and how much energy their household uses, the energy-efficiency upgrades could save a homeowner hundreds of dollars a year — as well as help fight climate change.

That’s where HVAC contractors come in. The IRA pushes replacing old equipment with new, energy-efficient systems and provides incentives so homeowners will want to upgrade their systems. Many homeowners may not be aware of these incentives and how they could save money. If HVAC contractors are up-to-date on what the IRA entails, they can leverage their expertise and land money in both their customers’ pockets and their own.

What This Means for HVAC Customers

Part of the bill includes $370 billion for energy climate programs, which has major incentives mostly through tax credits and rebates. These incentives go directly into the pockets of homeowners who choose to replace fossil fuel furnaces, boilers, and water heaters with high-efficiency electric options that are powered by renewable energy.

“The IRA bill’s rebates, or tax breaks, for qualifying consumers who add efficient heat pumps, rooftop solar, electric HVAC, and electric water heaters should be a major driver for sales,” James said. “The rebates will also help drive the SEER 2 transition as well as ease the challenges with the adoption of A2L equipment.”

The bill also includes $9 billion in total energy rebates, including the $4.28 billion high-efficiency electric home rebate program, which returns a rebate of up to $8,000 to install heat pumps and a rebate of up to $1,750 for a heat-pump water heater.

“These incentives should be very appealing to many HVAC customers,” James said.

The IRA also includes a rebate of up to $1,600 to insulate and seal a house, and a rebate of up to $2,500 for improvements to electrical wiring — “funds in the IRA to be claimed for smaller actions,” James explained. The U.S. Environmental Protection Agency said a well-sealed and insulated home can save an average of 15% on heating and cooling costs.

For homeowners who don’t qualify for rebates, the IRA provides for a tax credit of up to $2,000 to install heat pumps.

Additionally, the legislation revives a 30% tax credit for installing residential solar panels and extends the program through December 31, 2034.

“Homeowners who install solar battery systems with at least three kilowatt-hours of capacity would also qualify for the tax credit,” James said.

The bill is meant to return green energy back to the U.S. by providing this money to accelerate domestic production of solar panels, wind turbines, and batteries, as well as supporting the production of the necessary materials needed for energy-efficient batteries, and helping households leverage their solar power, James said.