NewsNational Politics

Actions

New tax incentives make heat pumps more affordable for your home

Some incentives in the Inflation Reduction Act take effect January 1st.
Tax Season Begins
Posted at 4:00 AM, Dec 27, 2022
and last updated 2022-12-27 07:11:57-05

ATLANTA, Ga. — A working furnace has been much appreciated this holiday season in many parts of the country, especially with record-breaking temperatures.

A working heating and cooling system is probably not something you think of until you need it.

However, new tax credits are making some of the most energy-efficient systems more affordable in the new year, creating an option to save your family money.

WHAT'S A HEAT PUMP?

Heat pumps have been around since the 1940s, but for many Americans, they are still a bit of a mystery.

That's why we reached out to Tim Uzar, the founder of Ecomech Geothermal Heating and Air.

"This is a geothermal heat pump," Uzar said.

While that sounds like a mouthful, because of new government tax breaks, homeowners may want to pay attention. A heat pump, generally, cools your home when it's hot outside and warms your home when it's cold.

In the summer, it works by taking hot air out of your house and replacing it with cool air.

In the winter, it pumps in the air that has been warmed from the outside. Heat pumps can be air-sourced or ground-sourced. Geothermal heat pumps are ground-sourced — storing and moving heat from deep underground.

"That's all we do is move heat from one space to another," Uzar says.

Heat pumps are in the news because the new tax credit taking effect on Jan. 1 makes installing heat pumps and other energy-efficient upgrades to your home more affordable. Some incentives are already in effect.

That matters because heat pumps are often more expensive than traditional heating and air systems.

"It's about two and a half to three times more expensive," Uzar says.

Once they are in, though, utility bills can go down.

When asked much a heat pump saves a homeowner, Uzar said, "Generally, 40-70%."

"You got to break an egg to make an omelet," Uzar added.

Still, the installation sticker shock has prevented many homeowners from making the switch. Depending on the size and model, heat pumps range from $4,000 to $40,000.

INFLATION REDUCTION ACT

That is why you want to read up on the Inflation Reduction Act. For instance, low-income households can cover 100% of specific heat pumps.

Moderate-income households can get 50% of the costs paid.

That's potentially an $8,000 savings.

If you are a higher-earning family, starting Jan. 1, a tax credit of up to $2,000 a year is available if you make any energy-efficient upgrade to your home.

Uzar showed us a geothermal heat pump — the most expensive and energy-efficient model. A new 30% tax credit for this is in effect.

"That brings it down to a more swallowable number," Uzar said.

If you are wondering why Washington and other governments worldwide are so interested in heat pumps, the answer is climate change.

In one neighborhood south of Atlanta, heat pumps are the only type of heating and cooling allowed because they don't emit as much carbon dioxide. They also don't require an ugly box on the side of your house, like a traditional air conditioner.

In Washington State, a new state law says all homes and apartments built after July must have them.

Uzar's advice to homeowners? Do some research.

"I do expect there to be more interest," Uzar says, referring to the tax changes.