Energy Tax Credits for 2023

hvac tax credits

If you’ve been considering upgrading your heating and cooling systems at home to more efficient options, now is your chance to do so while saving a bit of cash. Thanks to the most recent legislation implemented by the U.S. Government, homeowners can now claim a portion of the purchase and installation costs of their high-efficiency HVAC products. Let’s take a closer look at the law that makes these credits possible and explain how you can qualify for the credit. 

Inflation Act of 2022 in Simple Terms

We are in the middle of yet another inflation, which means that many people are struggling to keep up with their day-to-day expenses. To slow down the rate of inflation and its harmful impact on our economy, our legislators instituted the Inflation Act of 2022.  This law includes various financial solutions, including tax credits that incentivize homeowners to upgrade their HVAC equipment to more efficient models. This helps our government monitor and conserve more energy while allowing the people to save a portion of their money. 

Tax Section 25C: Energy Property Credit for Residential Homes

One of the key elements of the Inflation Act is Tax Section 25C, which provides a tax credit that equals up to 30% of the installation costs when the highest efficiency tier products are purchased. The total amount a taxpayer will receive in their tax credit will depend on the region they live in and the product they purchase. 

Below, we break down the requirements for the state of Colorado. Please note that all equipment purchased must be ENERGY STAR certified  to qualify for the tax credit. 

These tax credits are available and will run from 2023-2032. 

Heat Pumps

Buying heat pumps that meet the following required ratings can earn you up to $2,000 in tax credits: 

  • Split Ducted Heat Pump – with SEER2 ≥15.2, EER2 ≥10, HSPF 2 ≥ 8.1
  • Non-Ducted Heat Pump – with SEER2 ≥16, EER2 ≥ 9, HSPF 2 ≥ 9.5
  • Packaged Heat Pump – SEER 2 ≥15.2, EER2 ≥10, HSPF 2 ≥ 8.1


For gas-fired forced air furnaces rated at 97% AFUE, a maximum tax credit of $600 is available for homeowners who decide to purchase this product in 2023.

Air Conditioners

The following air conditioning systems qualify for up to $600 in tax credits if they meet the following standards:

  • Split AC – with SEER 2 ≥16, EER2 ≥12, 
  • Packaged AC – with SEER 2 ≥15.2, EER2 ≥11.5

Tax Section 25D: Residential Energy Efficient Property

In addition to Tax Section 25C, there is also Tax Section 25D that provides a tax credit equaling 30% of the installation costs when an ENERGY STAR geothermal heat pump is installed. This program is also available until 2032. 

High-Efficiency Electric Home Rebate Program

While the tax credits provide a great sense of financial relief to homeowners, the Inflation Act of 2022 also made an income-based rebate program available. This rebate program states you can qualify for either a 100% or 50% rebate if you meet the following criteria: 

  • To qualify for a 100% rebate, a household’s income must be 80% of the total local median income.
  • To qualify for a 50% rebate, a household’s income must be between 80% to 150% of the total local median income. 

Unfortunately, those who make over 150% of the total local median income do not qualify for this rebate program. 

Award-Winning HVAC Installations in Colorado Springs

Thanks to these amazing tax breaks and rebates, investing in a higher-efficiency air conditioning or heating system has now gotten easier. Hurry to take advantage of these tax breaks by calling One Source Home Service to learn about your installation options.

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