Installing any type of new cooling or heating unit in your Chicago, IL, home is never going to be cheap. In most cases, you’ll spend at least a few thousand dollars whether it’s a new furnace, air conditioner, or heat pump. The good news is that there are a variety of different tax credits and rebates available to incentivize homeowners to install high-efficiency HVAC units.
Federal HVAC Tax Credits
The 2022 Inflation Reduction Act created a new tax credit program that covers certain types of HVAC installations. This program started at the beginning of 2023. Tax credits are tentatively scheduled to be available through the end of 2032. The program will likely run for a few years after that, but the amount of tax credit a homeowner is eligible for will be reduced starting in 2033.
A tax credit can cover up to 30% of the total cost of installing certain types of high-efficiency HVAC units. However, it’s capped at a maximum dollar value for each type of unit. To be eligible to receive the credit on your taxes, the unit must be installed by a certified, licensed HVAC contractor and meet certain energy-efficiency requirements. You’re also only eligible for a unit that you install in your primary residence. Only units installed in an existing home are eligible as well, which means you won’t be eligible if you install a qualifying unit when constructing a new home. One important thing to note is that the program only enables you to receive a credit that offsets some of what you own in federal income taxes. That means you won’t receive anything if you get a refund from the IRS instead of owing money.
Qualifying air-source central heat pumps and ductless mini-split heat pumps are eligible for a credit worth up to $2,000. Biomass boilers and heat pump water heaters fall into the same category and are also eligible for the same $2,000 credit. However, you’re still only allowed to claim $2,000 a year even if you install more than one qualifying unit.
Furnaces, standard boilers, central air conditioners, and ductless air conditioners fall into the second category and are eligible for a credit of up to $600 each. In this case, you can receive a credit of up to $1,200 in one year if you were to install either a new furnace or boiler as well as a new central or ductless AC. This category also allows you to earn the same credit of up to $1,200 per year for making certain energy-efficiency improvements to your home’s envelope. That includes things like replacing windows and exterior doors or adding insulation. Certain electrical upgrades also qualify.
All ENERGY STAR-rated HVAC units typically qualify under this tax credit program. However, there are different requirements for ducted and ductless heat pumps in Illinois and the rest of the Northern US. In our area, only ENERGY STAR-rated cold climate heat pumps are eligible. The other thing to note is that the energy efficiency requirements for a unit to receive an ENERGY STAR rating often increase from one year to the next. That means that if you’re considering upgrading your HVAC soon, you’re better off doing it this year. If you wait until next year, you may have to pay for a more expensive unit to be eligible to receive a tax credit.
Home Energy Rebates
The Inflation Reduction Act also created two new rebate programs through the Department of Energy, which then allocated funding to each state that chose to enroll in the programs. The funding is allocated based on the state’s population. Illinois is eligible to receive $263 million in funds. While the Illinois EPA Office of Energy applied to receive the funding in May 2024, the state’s application has not yet been fully accepted. However, the state has received $5 million in early administrative funding that it can use to start setting up the programs. The state can then start administering the program and giving out the rebates as soon as its application has been approved. This will likely be later in 2024 or early 2025.
Unlike the tax credit program that is available to everyone, the two rebate programs have specific income requirements. As of now, Illinois is currently only planning on offering rebates to low-income households that earn under 80% of the median income in their area. It’s possible the rebates will also be open to medium-income households in the future.
In terms of HVAC, the rebates will only be available for eligible homeowners who install an ENERGY STAR-rated electric heat pump. When installing a heat pump, you’ll be able to receive a rebate of up to $8,000. That means the rebate may end up covering the entire cost of your new heat pump.
The Illinois Home Weatherization Assistance Program
The Illinois Home Weatherization Assistance Program is also available to help low-income residents make certain upgrades to conserve energy. Qualifying homeowners are potentially eligible to receive up to $16,000 in assistance for energy-conserving weatherization work, which includes HVAC installation and repairs, among many other things.
Utility Company Rebates
Many utility companies also offer additional rebates to their customers who install certain types of appliances and HVAC equipment. In the Chicago area, ComEd offers rebates when you install an energy-efficient central air conditioner, air-source heat pump, or ductless mini-split heat pump. A ductless heat pump qualifies for a $1,300 rebate, and a new central heat pump qualifies for a $2,000 rebate. You’re also eligible for a rebate when installing a smart thermostat, having your home’s ductwork sealed, or having an AC or heat pump tune-up performed.
Peoples Gas also offers their customers rebates for installing a new high-efficiency natural gas furnace, boiler, or water heater. Programmable thermostats, smart thermostats, and air duct sealing are all eligible for rebates as well.
As with all the other HVAC incentives, you’ll need to show proof that a licensed HVAC company performed the installation. The new unit must meet certain energy-efficiency standards, and the amount of rebate money you earn varies based on the efficiency rating of your new unit.
One great thing about these utility company rebates is that they can be combined with the federal tax credit. That means you could save up to $4,000 on the cost of purchasing and installing a new central heat pump or $3,300 on a ductless heat pump.
Since 2005, Chris Heating & Cooling has been providing top-notch air conditioning and heating services in West Chicago and the surrounding areas. Our expert technicians install all types of HVAC equipment, including furnaces, air conditioners, heat pumps, and ductless systems. We also specialize in boilers and radiant heating systems and are ready to professionally handle all your residential and commercial HVAC installation needs. If you need any maintenance or repair services, our team services all makes and models and is available 24/7 for emergencies. To schedule an appointment and receive an estimate for your HVAC needs, contact us today.
