Thinking about a home heat pump? New and expanded government incentives, combined with skyrocketing utility rates, make it even more attractive.
Especially when combined with a clean energy source such as a rooftop or community solar panel, a heat pump—the only appliance that can replace a homeowner’s traditional air conditioning system and stoves—can heat and cool homes with less harm to the planet.
These investments are also becoming increasingly attractive to consumers, given the severe impact of inflation. According to SaveOnEnergy.com, a whopping 87 percent of US homeowners surveyed said they experienced price increases in at least one home service or utility category during the summer. There is another possible benefit: stimulus through the recently passed Inflation Reduction Act of 2022.
Environmental law director Miranda Leppla said: “Not only will these incentives save you money on your utility bills now and in the long run, they will also set our economy on track to reduce climate change-causing fossil fuel use. Fuel Consumption”. Western Reserve University Legal Clinic. “It’s a win-win.”
The use of heat pumps will become more common as governments pass laws to implement them. The state of Washington has recently mandated the use of heat pumps in new home and condominium construction. In July, California Gov. Gavin Newsom announced a goal of building 3 million climate-ready homes by 2030 and 7 million by 2035, as well as 6 million heat pumps.
According to Rewiring America, a nonprofit dedicated to electrifying homes, businesses and communities, heat pumps are suitable for any climate and are three to five times more energy efficient than traditional heating systems.
Instead of generating heat, these devices transfer heat from a cool outside to a warm room and vice versa. Heat pumps run on electricity, not natural gas or propane, both of which have higher carbon emissions than renewable energy sources such as wind or solar, said Jay C. Golden, director of Syracuse University’s Dynamic Stability Laboratory.
Installing a heat pump can cost anywhere from $8,000 to $35,000, depending on factors like home size and type of heat pump, but according to Rewiring America, the average family saves hundreds of dollars a year. because according to Rewiring America, the average lifespan of a heat pump that most people consider installing is 10 to 15 years.
Electricity prices also tend to be more stable, which insulates consumers from gas price fluctuations, says Joshua Skov, business and government sustainability consultant, industry mentor and lecturer at the University of Oregon.
“Despite the initial cost, millions of homeowners save money by using heat pumps over the life of the unit,” he said. “The federal government covers most of the upfront costs, and you’ll save even more.”
The Inflation Reduction Act, the federal government’s wide-ranging climate protection initiative, includes several incentives to lower the cost of energy-efficient real estate improvements. These incentives far exceed those available to homeowners today, said Jono Anzalone, a professor at the University of Southern Maine and executive director of the Climate Initiative, which empowers students to fight climate change.
For low-income households, the Inflation Reduction Act covers 100% of the cost of a heat pump up to $8,000. For middle-income households, it covers 50% of heat pump costs up to the same dollar cap. Homeowners can use a calculator, such as the one provided by Rewiring America, to determine their eligibility for assistance.
If you’re considering upgrading a few green homes, be aware that the general legal threshold for a “suitable electrification project” is a maximum of $14,000 per household.
For those above the income threshold, starting January 1, they have the option of taking advantage of the non-profit energy real estate loan, commonly known as 25C, said Peter Downing, director of Marcum LLP, an accounting firm. stimulus group.
Homeowners can receive a 30 percent tax credit on home energy efficiency items such as heat pumps. In certain years, they may receive a loan of up to $2,000 to install certain equipment, such as heat pumps. According to the Congressional Research Service, the loan expires after 2032.
Another tax credit is given to homeowners who purchase a ground source heat pump, a more expensive but more durable option on average. Rewiring America estimates that the average cost of a geothermal heating installation is about $24,000, a lifespan of 20 to 50 years, and homeowners receive an unlimited 30 percent tax credit. According to Rewiring America, this means the average tax credit for these pumps is about $7,200.
The drafting of regulations for the Inflation Reduction Act is still ongoing. But Downing said eligible consumers could be allowed to receive both discounts and credits. But the math is unlikely to be that simple, according to previous IRS guidance on government-backed energy rebates. Suppose a customer is eligible for a 50% discount on a $6,000 heat pump. For tax credit purposes, the remaining $3,000 could qualify for a 30 percent tax credit, leading to a potential $900 credit, he said.
State, city, and local utilities may offer discounts on certain high-efficiency appliances, including heat pumps. “Check with everyone because there are so many different levels of planning that you really need to understand economics,” said John Huntley, senior budget modeling economist at the Wharton School of Business in Pennsylvania.
Since programs are updated frequently, be sure to check back frequently to see what new state, local and community incentives are available, Golden said. Reputable local contractors should also be aware of local discounts, he said.
Many installers have aggressive financing packages in place to make heat pump installations more viable, Anzalone said.
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