Manufacturer's report courtesy of ecoer.

As The ACHR News has extensively reported, the Inflation Reduction Act (IRA), signed into law last August, includes tax incentives to homeowners who switch to energy efficient HVAC technologies, like electric heat pumps, for their heating and cooling needs.  The IRA is yet another example — along with various local and state rebates, revolving loans, grants, tax credits, etc. — of our country’s steps toward decarbonization through electrification.

In full disclosure, I should note that my company makes highly efficient electric inverter heat pumps and,while the IRA and the other incentives previously described are a boon to manufacturers like us, HVAC contractors can find these programs confusing and difficult to keep up with. But those residential HVAC salespeople who ignore these incentives are missing an important resource that can help them close deals.

Before I joined the manufacturing side of the industry, I owned an installation and service business for thirteen years.  So, I know the art of HVAC sales comes down to  the “kitchen table” moment.  This is the time after you’ve completed your customer interview, your walk-through, load calculations, customer interview to determine their wants, needs, and budget, and are ready to present your final recommendation and quote.  Anything that helps you establish trust with your customers and lets them know that you’re on their side can make all the difference in closing a sale.  

Here are some particulars about these various incentives that you should include in your kitchen table talks.

Inflation Reduction Act HVAC Rebates & Tax Credits

Rebates and tax credits for energy efficient residential HVAC equipment under the IRA are now in effect for items installed between January 1, 2023 and the end of 2032.  While the government has not yet published how rebates under the act’s HOMES (Home Owner Managing Energy Savings) Rebate program will be administered and distributed, it gives cash back to homeowners who reduce their overall home energy use through weatherization upgrades (such as adding insulation or upgrading windows) or by installing more efficient appliances and HVAC equipment.  The total amount an applicant can get back depends on how much energy is saved through those efforts, how they demonstrate those energy savings (e.g. through computer software modeling or measured, certified energy saving audits), and their household income.  Since the government is still fuzzy on how the program will work at the local level, the best way to apprise your customers of the HOMES Rebate program is to be up to speed on the programs offered by your state and/or local municipalities and utility providers since they will most likely be tapped to administer these rebates.   I’ll touch on this in more detail a little later in this article.

On the other hand, the homeowner tax credits for the installation of efficient HVAC equipment available through the IRA are pretty cut-and-dried and administered by the IRS.  The homeowner simply needs to provide receipts for proof of purchase and installation of the equipment with the proper IRS forms when filing their 2023 taxes.  Since this new credit just went into effect the first of this year, the IRS forms are not yet available for download.  Now, I’m no tax professional and I doubt most HVAC installers are either, so with all things related to taxes, you need to advise your customers to check with their personal professional tax preparer to file for these credits when apprising them of their availability.

HVAC Equipment Eligible for IRA Tax Credits

This IRS fact sheet lists the HVAC equipment eligible for IRA tax credits as “electric or natural gas heat pumps, electric or natural gas heat pump water heaters, central air conditioners, natural gas or propane or oil water heaters, natural gas or propane or oil furnaces or hot water boilers: [all which] must meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency (CEE) that is in effect as of the beginning of the year in which the property is placed in service.”  Items like ultra-efficient heat pump A/C units and heat pump water heaters can qualify for as much as a $2,000 credit cap.  Tiers are based on the new SEER2/EER2/HSPF2 ratings, which also went into effect the first of this year.  The CEE provides a breakdown of these tiers and minimum ratings here.

 Similar to the HOMES Rebate program, there are other tax credits available to homeowners for energy efficiency upgrades beyond the purchase and installation of HVAC equipment so, again, advise your customers to speak with their professional tax preparers in the event they are undertaking or considering additional weatherization or home envelope projects.

State and Local Incentives

Many state, municipalities, and local utilities provide their own financial incentives to homeowners for choosing energy efficient HVAC products.  Contractors’ sales personnel should become familiar with all incentives offered within their service area.  Quick Google searches of local utilities can let them know what rebates and other incentives are available to their customers.  Another excellent resource to use for this is the Database of State Incentives for Renewables & Efficiency (DSIREusa.org) maintained by the North Carolina Energy Technology Center, a not-for-profit agency that provides services to businesses and citizens relating to the development and adoption of clean energy technologies.  Searches can be organized with filters for specific states, technology, and HVAC equipment to find what specific incentives are available to homeowners in your immediate area.

Helping Past & Existing Customers with the Energy Efficient Home Improvement Tax Credit

The Energy Efficient Home Improvement Tax Credit is the previous program upgraded and replaced by the IRA.  Under the old program, energy efficient HVAC equipment purchased by homeowners qualified for a one-time $500 maximum credit.  Want to know a great way to endear yourself to your past installation customers?  Go through your records and contact all your installation customers from during the pandemic to let them know they can qualify for this $500 credit for installations done before December 31, 2022.  Again, it can’t be said enough, they should inquire about these credits and other incentives through their accountant or professional tax preparer, but you can be the one who opens the door to this possibility.

Be Your Customer’s Advocate & Hero

Beyond just making a sale, offering your customers information and advice about programs that can help ease the burden of what is undoubtedly a major expense for them makes you more than just a service provider, it makes you their ally and advocate. Some may even think of you as their hero.