Federal Tax Credit

Inflation Reduction Act of 2022

In August, the U.S. Government passed the Inflation Reduction Act, a comprehensive energy policy bill that has a record $370 billion reserved spending for climate and energy initiatives. This legislation offers several tax credits that reward homeowners for purchasing higher efficiency, ENERGY STAR®-certified and Consortium for Energy Efficiency-specified equipment.

Richmond® is working hard to ensure that homeowners are prepared for the coming tax year and will be updating this page as new information becomes available.

Here’s what you need to know about the Inflation Reduction Act:

What kinds of tax credits and rebates are available to homeowners?

The Inflation Reduction Act of 2022 includes several tax credits for the installation of high-efficiency residential heating and cooling and water heating products. These credits include:

Nonbusiness Energy Property Credit (Tax Section 25C)
Heating & Cooling

Effective January 1, 2023, this tax credit gives homeowners equal to 30% of installation costs for the highest efficiency tier products, up to $600 for qualified air conditioners and $600 for qualified furnaces, as well as up to $2,000 for qualified heat pumps.

Water Heating

Effective January 1, 2023, this tax credit gives homeowners equal to 30% of installation costs for the highest efficiency tier products, up to:
$600 for gas-fired tankless with UEF ≥ .95 and gas-fired storage with UEF ≥ .86 water heaters; and
$2,000 for heat pump water heaters with UEF ≥2.2 for 120V and UEF ≥3.3 for 240V models

Residential Energy Efficient Property (Tax Section 25D)
Heating & Cooling

This tax credit gives homeowners equal to 30% of installation costs for ENERGY STAR geothermal heat pumps until 2032, which drops to 26% in 2033 and 22% in 2034.

Water Heating

This tax credit gives consumers up to 30% of the solar water heater and installation costs and cannot exceed the consumer’s regular tax liability for the taxable year; however, unused credit may be carried forward and used in the succeeding taxable year.

High-Efficiency Electric Home Rebate Program

An income-dependent rebate to eligible homeowners. Homeowners can receive:

  • Up to $8,000 for all-electric heat pumps
  • Up to $4,000 for electrical load service center upgrade
  • Up to $2,500 for electric wiring
  • Up to $14,000 maximum for all eligible measures

What equipment qualifies for the credits?
Heating & Cooling

Eligible products include high-efficiency air conditioners, furnaces and heat pumps. Stay tuned for more information on specific qualifying Richmond products.

Water Heating

The Rheem® Water Heating Division of Rheem Manufacturing Company certifies that the water heating models listed here meet the criteria for the federal tax credit of 30% of the water heater and installation costs up to:
$600 for gas-fired tankless with UEF ≥ .95 and gas-fired storage with UEF ≥ .86 water heaters; and
$2,000 for heat pump water heaters with UEF ≥2.2 for 120V and UEF ≥3.3 for 240V models

Do these tax credits apply to equipment installed prior to the Inflation Reduction Act?

Original Section 25C tax credit incentive levels and product qualification criteria for air and water products remain unchanged through the end of 2022 and are retroactive to qualifying products purchased after January 1, 2022, and installed prior to January 1, 2023. The maximum amount an eligible homeowner may receive in federal tax credits for purchasing and installing qualifying products is 10% of the installed cost, up to $500.

To learn more about Richmond products and financing options, contact your local Pro Partner at Where to buy.