Inflation Reduction Act Tax Credits
The Inflation Reduction Act (IRA) provides a tremendous opportunity for homeowners to switch to heat pumps and other clean, efficient energy solutions by offering significant federal income tax credits, available through 2032.
These tax credits can be combined with NYS Clean Heat rebates, low-interest financing, and State tax credits, making heat pumps more affordable than ever before.
The tables below summarize available tax credits and incentives for different types of heat pumps as well as related improvements you might consider along with heat pumps, such as electric panel upgrades and home weatherization measures.
Tax Credits and Incentives for Clean Heating, Cooling, and Water Heating
| Eligible Clean Energy Technology | Federal IRA Tax Credits 2023-2032 | New York State Incentives and Tax Credits |
|---|---|---|
| Cold-climate Air Source Heat Pumps | 30% of cost, up to $2,000 per year |
NYS Clean Heat incentives for partial home solutions: $100-$400, on average NYS Clean Heat incentives for whole home solutions: $2,000-$3,000, on average |
| Geothermal (Ground Source) Heat Pumps | 30% of cost |
NYS Clean Heat incentives: $7,000-$9,000, on average NYS Tax Credit: 25% of cost, up to $5,000 |
| Heat Pump (Hybrid) Water Heaters | 30% of cost, up to $2,000 per year |
NYS Clean Heat incentives: $700-$1,000, on average |
NYS Clean Heat incentive amounts may vary depending on your location and electric utility. Click on Find Available Rebates to see which incentives you are eligible for.
Tax Credits and Incentives for Related Clean Energy Improvements
If you’re considering a heat pump for your home, it might be necessary to upgrade your electric panel. You should also consider getting a no-cost energy assessment to identify any areas your home is wasting energy. Adding insulation or upgrading your windows and doors may improve the efficiency of your heat pump system.
| Eligible Clean Energy Technology | Federal IRA Tax Credits 2023-2032 | New York State Incentives and Tax Credits |
|---|---|---|
| Electric Panel or Circuit Upgrades for New Electric Equipment | 30% of cost, up to $600 | |
| Insulation | 30% of cost, up to $1,200 | NYSERDA incentives for insulation packages: $1,000–$4,000 |
| Windows & Skylights | 30% of cost, up to $600 | Eligible for incentives through NYSERDA |
| Exterior Doors | 30% of cost, up to $500 for doors (up to $250 each) | |
| Home Energy Assessment (Audit) | 30% of cost, up to $150 |
Free for all New Yorkers
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Maximizing Your Tax Credit Potential
The Inflation Reduction Act caps the overall amount of tax credits a homeowner is eligible to receive in a single year for energy improvements to $3,200. This includes a $2,000 annual cap for any combination of heat pumps, heat pump water heaters, or biomass fuel stoves, and a $1,200 annual cap for any combination of home envelope improvements (e.g., insulation, windows, doors), electrical work, furnaces, boilers, or central air conditioners.
It may be to your benefit to make improvements over time to maximize your tax credit potential. For example, installing a heat pump heating and cooling system and a heat pump water heater in separate years may result in more tax credits than installing them at the same time. Work with your contractor to determine a roadmap for improvements that considers when equipment is due for replacement and your potential to save with tax credits and incentives.
Other Important Considerations
- Not all equipment is eligible for tax credits or incentives. Work with your contractor to select qualifying equipment.
- Equipment purchased and installed will be eligible for federal tax credits during the next tax season. For example, if you install a heat pump in 2023, you can apply for tax credits when you file your taxes in 2024.