Installing a new heat pump or any other new HVAC unit is always a major investment. The good news is that there are several different rebate programs and tax credits for new heat pumps, air conditioners and furnaces that can help lower the cost of your new unit. Today we’re going to show you what HVAC rebates are available in California and what federal tax credits you can receive if you qualify.

California’s HVAC Rebate Program

The Inflation Reduction Act of 2022 set aside more than $4 billion in federal funding for two new home energy efficiency rebate programs that will be administered by each state. California is expected to receive more than $580 million to fund these two programs. Of this funding, approximately $292 million will go to the new Homeowner Managing Energy Savings (HOMES) rebate program and the other $290 will go to the High-Efficiency Electric Home Rebate (HEEHRA) program. These programs will remain in effect until the state has distributed all the funds it was allocated.

Both programs will provide rebates to homeowners when they purchase and install a new electric heat pump or make certain other upgrades that improve the energy efficiency of their home. Unfortunately, both programs won’t go into effect until sometime in 2024. As such, you may want to hold off until next year if you’re considering upgrading your home with a heat pump as the rebates will most likely not apply retrospectively, which means you can miss out on quite a bit of money if you install the heat pump before the programs take effect.

HOMES Rebate Program

The HOMES rebate program will be available to low-income and medium-income families who have a yearly household income under 150% of the median income in their area. Low-income families can be eligible for a rebate of up to $8,000 when they purchase a new heat pump, whereas medium-income families can receive a rebate of up to $4,000. These rebates can be applied to both the cost of the unit and the associated installation costs. The exact amount that a homeowner can qualify for when installing a new heat pump will be based on the total energy savings the new unit provides, i.e., how much the unit improves the home’s energy efficiency. The same is also true when making any other type of upgrade to improve the energy efficiency of a home.

HEEHRA Rebate Program

The HEEHRA program will also be open to single-family households that earn under 150% of the area’s median income. This program will provide rebates when you purchase certain qualifying ENERGY STAR appliances including electric heat pumps, electric heat pump water heaters, electric heat pump clothes dryers and electric cooktops, ovens and range hoods. Rebates will also be available for other upgrades as well including air sealing and installing new ENERGY STAR windows and doors. The state has not yet announced how much of a rebate you can get for each type of appliance or each upgrade, but homeowners can potentially qualify for a total rebate of up to $14,000.

Federal HVAC Tax Credits

Along with the new state-administered rebate programs, the Inflation Reduction Act also created a new tax credit program for homeowners who install any new HVAC unit that meets specific energy efficiency requirements. Unlike the rebate programs, the tax credits are currently available as this new program went into effect at the start of 2023. This program will continue to run until the end of 2032, which means you will be eligible for it if you install a new high-efficiency HVAC unit any time in the next decade. To claim the tax rebate, the unit must be installed by a certified, licensed HVAC contractor and you will need to include a copy of the purchase and installation bill from the contractor when you file taxes the following year.

Under this program, you can be eligible for a tax credit of up to $2,000 for installing a new air-source heat pump or ductless mini-split heat pump. New furnaces and air conditioners are also eligible for a tax credit of up to $600 each or $1,200 total if you installed both. Heat pump water heaters are also eligible for a credit of up to $2,000. However, it is important to note that all these credits are capped at a maximum of 30% of the total purchase and installation cost of the new unit so you may not qualify for the full amount.

A new ground-source heat pump is also eligible for a tax credit of 30% of the unit’s installation cost, and this credit has no cap so you will always get 30% of the cost taken off your next year’s taxes. Homeowners can potentially qualify for a credit of up to $3,200 per year as this program also covers other improvements such as electrical panel upgrades, insulating and air sealing and replacement windows and exterior doors.

One important thing to note about these tax credits is that the new HVAC unit must have at least a certain energy efficiency rating to qualify. Specifically, any unit is only eligible if it is efficient enough to receive an ENERGY STAR certification. The requirements to be ENERGY STAR certified are usually updated every few years. As such, a unit that would currently qualify for a tax credit may not qualify in the future.

Tech Clean California Rebate Program

The state also started the Tech Clean California rebate program in April 2023 as another way to incentivize homeowners to make the switch to energy-efficient heat pumps. As part of this program, the state allocated $19 million to provide rebates for anyone who installs a new heat pump in a single-family dwelling. This program provides a $1,000 rebate on any new heat pump installation, and it will remain active until all the allocated funds have been distributed. Unlike many of the other programs, homeowners themselves are not eligible to apply directly for the rebate, which means you will need a licensed HVAC contractor to apply for you.

Utility Provider Rebates

Many utility providers also offer their own rebate programs for customers who install new heat pumps. At the time of this writing, there are currently 22 electricity providers in California that offer rebates for new heat pumps. Unfortunately, PG&E does not currently offer a heat pump rebate, but Sacramento Municipal Utility District does offer a rebate for new heat pumps worth up to $3,500.

Atticman Heating and Air Conditioning, Insulation is a locally owned and operated HVAC company specializing in heating and cooling installation for customers throughout the Sacramento area. We offer an extensive range of new heat pumps, furnaces and air conditioners, and we can help you choose a unit that will qualify you for the various rebate programs and the federal tax credit. If you have any HVAC unit that isn’t functioning as effectively as it should, we also offer professional heating and cooling maintenance and repair services. For more information on the range of new heat pumps and other HVAC units we offer, give us a call today.

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