Energy Efficiency Home Improvement Tax Credits
An Overview of Tax Credits for Heat Pumps, Mini-Splits, Central Air Conditioners, Electrical Panel Upgrades, & Water Heaters
What equipment qualifies?
- Most heat pumps are eligible for a $2,000* tax credit!
- Most mini-splits are eligible for a $2,000* tax credit!
- Most central air conditioners are eligible for a $600* tax credit!
- Electrical panel upgrades are eligible for a $600* tax credit!
- Gas water heaters are eligible for a $600* tax credit!
Most HVAC, electrical, plumbing, and other home services companies cannot offer tax advice and have to end every article with ‘consult with a tax professional for details.’ But with Surfside Services, we share common ownership with a local accounting firm, Azalea City Tax & Accounting, and have Christopher Olson, EA, a local tax expert, who can provide our customers with helpful tax advice.
These tax credits are complicated, and while the new Inflation Reduction Act has provided funding for these programs, not all of the details, such as income limitations and some state specific programs, have been determined. That’s why it is so important to have a tax professional who can help you understand if you are eligible before you commit to a major purchase.
As these programs’ details emerge, we want to make sure you have the right information. By keeping up with our blog at https://surfside.services/blog or following us on Facebook, you’ll be guaranteed to have the most up-to-date information on these tax credits from a qualified, licensed tax professional.
How Exactly Does this Work?
With every eligible purchase, we will provide a signed letter from our in-house licensed tax professional, Christopher Olson, EA, providing all the necessary eligibility information and details you’ll need to claim your tax credit at the end of the year. You'll be able to easily provide this to whomever you use for taxes, or follow the information yourself, to make sure to maximize your total savings.
How Much More Do I Pay for the Eligibility Letter?
Nothing. There is no additional cost and our pricing has not changed with the adoption of this service. It is our privilege to be able to help you qualify for tax credits that make your heat pump, electrical panel upgrade, or water heater more affordable.
How Do I Determine if I am Eligible?
The exact details for eligibility are not entirely determined yet, but we do expect certain things and we do know certain things at this time.
What we know about the Energy Efficiency Credits
We know what equipment is eligible and how much the credit can be for those purchases. For example, a qualifying heat pump will provide a credit at 30% of the project cost up to $2,000 as a nonrefundable tax credit. Likewise, a gas water heater or electrical panel upgrade will provide 30% of the project cost up to $600 as a nonrefundable tax credit.
What we don’t know about the Energy Efficiency Credits
We don’t know the income levels for qualifying. Most tax credits phase-out after a certain income level is reached, and we are expecting this credit to phase-out likewise. The child tax credit for married filers, for example, phases out at $400,000 in 2022, and the Qualified Business Income Deduction phases out at $340,100 in 2022. Most every credit or deduction has some limit to exclude the wealthiest of individuals from claiming it, which is expected to be the case with this credit as well.
While we cannot say definitively until the IRS releases its official guidelines on this credit later this year, it is reasonable to expect that middle-income and lower-income earners will have no problem qualifying for these credits based on income, but we are waiting for the IRS guidelines to know for sure.
Additionally, we don’t know for sure how much product information you will need to include with your tax returns, but it is likely you will need the serial number and other information besides just how much you paid. With the tax credit eligibility letter we provide, all this information will be readily available to you to keep your yearend taxes simple.
Lastly, we don’t know what Alabama is going to do. The Inflation Reduction Act provided substantial funds to the states for developing their own programs. Some states are planning point-of-sale credits, for example, where instead of waiting until the end of the year to claim the credit you can claim it immediately and have it paid to your contractor to help offset the upfront costs. Alabama has not indicated it will be providing any point-of-sale relief, but they will likely provide some level of stimulus or rebate to be announced later in 2023.
What we expect about the Energy Efficiency Credits
Based on how credits are typically fashioned, we expect the income phase-out limitation to start somewhere around $150,000 for single filers, and perhaps twice that for married filers. It certainly may be much higher, but we expect that’ll be pretty close.
Our recommendation would be that if your purchase intent is based on eligibility for this credit, wait a few months. In a few months we should have more exact details for eligibility, and then you can make your purchase with greater certainty that you’ll qualify. But if you’re needing to make a purchase anyway because your A/C unit has gone out, or your electrical panel is unsafe and needs upgrading, or your water heater has finally reached the end of its life, we want to help you make the purchase that has the greatest chance of qualifying for these credits pending a full release of eligibility details. To do this, we’ll recommend eligible equipment and provide all the right information you will need, as well as provide tax advice based on the current information available from the Internal Revenue Service and/or Alabama Department of Revenue.
How Do I Get Started?
If you're needing to purchase a heat pump, mini-split, gas water heater, or electrical panel upgrade, start with a free estimate. From there, we will determine what eligible product best suits your needs, as well as help determine your eligibility for these credits prior to your purchase.
Where Can I Learn More?
If our overview has you interested, we can definitely help you learn more. Checkout our resources below: