How to Save Thousands With Federal Heat Pump Rebates
For years, heat pumps have saved homeowners and property managers money by providing heating and cooling at a lower cost than traditional gas, oil, or electric heat.
Now, thanks to a new wave of federal rebates for heat pumps, these HVAC systems are even more cost-effective.
Starting in 2022, homeowners can claim up to $8,000 in rebates for installing a qualified heat pump system or other energy-efficient heating and cooling equipment. It’s part of the Inflation Reduction Act, which was passed into law in 2022.
That’s on top of federal tax credits available since 2020 and offers from your local utility company and even the manufacturers.
If you live in Pennsylvania, New Jersey, Delaware, or Maryland, our Carrier Factory Authorized Dealers can help you find all these offers.
As a product manager for the HVAC distributor Peirce Phelps, I’ve spent more than a decade learning the ins and outs of these systems, staying on top of the latest industry trends, and working closely with contractors in the mid-Atlantic region.
This article focuses mainly on federal-level rebates, particularly through the IRS and Inflation Reduction Act. You’ll learn everything you need to know about these, including how to apply.
I’ll also give you some information on state-by-state offers in our area.
The good news is that you don’t have to handle all this yourself! Your HVAC contractor can help you find these rebate programs. They’ll often submit everything you need to take advantage of them.
While this article is mainly geared toward homeowners, I put some information for commercial properties and builders toward the end. Likewise, these offers also apply to heat pump water heaters, geothermal heat pumps, and other energy-efficient equipment.
If you’re searching for a trusted company, check out our dealer locator to find a reputable contractor with a great work history in your area.
2022 Inflation Reduction Act
The Inflation Reduction Act of 2022 increased the tax credits available for heat pumps and added a point-of-purchase rebate for them as well. These went into effect in January 1, 2023.
In other words, you can still get a write-off on your taxes at the end of the year when you install a heat pump. But now, you can also get money off the initial purchase price.
We’ll focus on the tax credits in a moment. For now, here’s what you need to know about the rebate:
High-Efficiency Electric Home Rebate Act (HEEHRA)
The High-Efficiency Electric Home Rebate Act, or HEERA, is that part of the Inflation Reduction Act that covers heat pumps. It’s income-based, so if your household income is less than 80 percent of your Area Median Income, you can get up to 100% of your cost covered up to $8,000.
That includes installation. So, if your new heat pump costs less than eight grand to install, you pay nothing.
Then, anyone making 80 to 150% of their Area Median Income can get 50% of the cost back, up to $8,000.
If you make over 80 percent of your AMI and have an $8,000 install price, you’ll get $4,000 back. If the cost is $16,000 or more, you’ll get the full $8,000.
You can find your area median income using this lookup tool.
How to Use The High-Efficiency Electric Home Rebate Act
As of March 2023, the funds for this rebate have yet to be disbursed. Let your HVAC contractor know you’ll want to take advantage of the offer — they should know all about it already. For now, save your invoices and model documentation for when you can apply.
Tax Credits For Energy Efficiency Home Improvements (Nonbusiness Energy Property Tax Credit)
Tax credits for heat pumps and other energy-efficient HVAC products have been available for homeowners since 2020. But, the credit amount decreased each year.
In 2023, the energy property credit amount increased again.
Now, you can get up to 30% of the cost of a new heat pump, up to $2,000, back on your taxes. There are other credits for various energy-efficient upgrades and installs, but this article focuses on heat pumps.
The heat pump tax credit you’ll get back after filing your 2023 return. It doesn’t reduce the amount you’ll pay upfront for an installation.
Instead, that credit gets added to what you’ll get on a refund. Or, you’ll pay less if you owe money on your taxes. There’s an annual limit to how much you can claim for equipment purchased and installed in a single year.
The Nonbusiness Energy Property Tax Credit
Homeowners can apply for the heat pump federal tax credit by filling out IRS Form 5695 and attaching it to their tax returns. They need to provide proof that they bought the equipment and had a professional install it.
What Heat Pumps and Mini Splits Qualify for Federal Rebates?
Virtually all heat pumps and mini splits on the market today qualify for federal rebates through tax credits and the Inflation Reduction Act. Each one must meet specific efficiency requirements, meaning they use less than a certain amount of electricity to produce heating or cooling.
Since heat pumps are exceptionally energy-efficient, very few on the market don’t make the cut. You should be fine if you’re going with a ducted or mini split model from a major brand.
We’ll go through the exact specifications in a moment. First, let’s run through the terminology you’ll need to know.
Types of Heat Pumps
There are three basic types of heat pumps: Air-source, geothermal, and water-source.
Air-source heat pumps pull heat from the air around them to provide heating. In cooling mode, they “dump” heat into the air.
Geothermal models transfer heat to or from the ground. Water-source do the same with a body of water.
Air-source heat pumps are by far the most common for households. Geothermal models are usable if you have a lot of land, but are more expensive.
Ductless Mini Split Heat Pump Systems
Ductless mini split heat pump systems use air-source heat pumps to deliver heating or cooling to one or more rooms at a time. They’re also called mini split ACs, ductless systems, or ductless air conditioners. These are all the same and are all eligible for rebates since they use a heat pump.
Split Ducted, Non-Ducted, and Packaged Heat Pumps
Split Ducted, Non-Ducted, and Packaged refer to how the heating or cooling gets delivered.
A “split ducted” system uses forced air and ductwork to move heat to and from the air handler. It works like a furnace or central air in that way.
A mini split would be an example of a “non-ducted” electric heat pump: Any delivery method not using ducts and vents.
“Packaged” is where one unit provides both heating and cooling. Contrast that with a furnace in the house and a central air condenser unit outside.
SEER Ratings for Rebates
In the country’s Northern region (which includes the mid-Atlantic states), a split ducted or packaged heat pump must have a SEER rating of at least 15.2 to qualify for tax credits. A non-ducted system must be 16 SEER or higher.
More Opportunities to Save
Now that you know how federal incentives work, I’ll go through a few more ways to save money on a heat pump system for your home.
If you have any more questions, especially about anything specific to your county or town, our dealer network is here to help! Click the button below to find an HVAC contractor with plenty of experience (and great reviews) that does work in your area.
Carrier Rebates
Throughout the year, Carrier offers various rebates and incentives to homeowners. Depending on the model and when you install it, you can usually get a few hundred or more off the installation price. Ask your HVAC contractor about the current offers when you start crunching numbers.
State-Level High-Efficiency Rebates for Homeowners
Local utility companies like UGI, PECO, PSE&G, and Delaware Electric Cooperative all offer rebates and incentives for homeowners to install energy-efficient appliances. Some of these offers come direct through the electric company. Others are through local agencies.
State-Level HVAC Incentives for Builders and Commercial Buildings
Here’s a quick list of offers for commercial buildings and builders rather than residential homeowners:
KeystoneHELP
This program offers financing for energy-efficient HVAC upgrades for commercial customers.
Pennsylvania Green Energy Works: This program offers financing and rebates for energy-efficient HVAC upgrades for commercial customers.
High-Efficiency HVAC Rebates Available for Builders And Commercial Buildings
Act 129 Rebates
This program offers rebates to eligible Pennsylvania commercial customers who install high-efficiency HVAC equipment.
Pennsylvania Department of Environmental Protection
This agency offers grants and loans for energy-efficient upgrades for commercial buildings, including HVAC systems.
Consortium for Building Energy Innovation (CBEI)
Technical assistance and resources to help New Jersey commercial building owners and operators make energy-efficient upgrades, including HVAC systems.
New Jersey SmartStart Buildings Program
Offers incentives and technical support to commercial, industrial, and institutional customers for implementing high-efficiency heating, cooling, and ventilation systems.
Energize Delaware’s Green Energy Fund
This rebate program offers incentives for energy-efficient HVAC equipment installation, including up to $3,500 for high-efficiency air-source heat pumps and $4,000 for geothermal heat pumps.
Delaware Municipal Electric Corporation
This program provides rebates for the installation of energy-efficient HVAC equipment in commercial buildings.
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