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Most potential home renovators have an eye on glamorous projects like kitchen or bathroom renovations.
Another big investment you can make in an almost invisible part of your home is the heating and cooling system. While it may not be great fodder for a before-and-after Instagram post, the money spent on a new one heat pumpfor example, it can make your home much more comfortable.
Now is a great time to add or upgrade heat pumps to your home because there is plenty of federal and local money on the table to help you afford it.
“You have many opportunities to pass the savings on to yourself,” said Katie Davis, vice president of residential HVAC engineering and technology at Trane Technologies.
So how much money can you get off the sticker price of a heat pump system? Here’s your guide to the financial incentives currently available.
How much does a heat pump cost?
Like any major home improvement, there are set of costs. On the low end, a heat pump system, including parts and installation, can cost $6,000 to $10,000, according to Davis. The top-of-the-line system can cost anywhere from $18,000 to $20,000.
The biggest variable, aside from the specifics of your home, is what type of equipment you choose. Higher efficiency systems (which result in greater savings on energy bills) cost more upfront than lower efficiency systems.
“It’s quite a range depending on what you’re looking for,” Davis said.
Federal Tax Credits and Incentives for Heat Pumps
The largest amount of federal money currently available for air source heat pumps is energy efficient home improvement loan. Part of the Inflation Reduction Actthis program allows you to claim 30% of the cost, up to $2,000, of a heat pump that meets certain efficiency standards.
The discount is tax credit, which means you’ll have to pay for the system upfront and then file a form that can reduce your tax burden for that year. You can apply the credit to the total cost of the project, including labor.
A separate program, also part of the IRA, is clean energy housing loan. This tax credit only applies to geothermal heat pumps (not air source heat pumps) and allows you to get back up to 30% of the project value, with no upper limit.
The last part of the IRA that applies to heat pumps is still being circulated. Federal law allocates $8.8 billion to states for home energy rebates, meaning states can provide additional rebates for heat pumps. Each country develops its own guidelines, so stay tuned for updates from your state.
“It’s just so new that they’re not all there yet,” Davis said.
new York recently became the first state to launch its home energy rebates called EmPower+ program. This rebate can go up to $8,000, depending on your household income.
How to find state, local and utility incentives for heat pumps
Long before the IRA came on the scene, many states already had their own programs that provided money for home energy improvements. These may be tax credits or direct rebates from the sticker price of the heat pump.
To find out what’s available in your state, check with your utility company or state government website. A quick search of programs in your state can turn up even more rebates you can apply to a heat pump.
“You can put in a really nice system at a lower cost because of the money that’s available,” Davis said. She notes that Trane’s website does too there is a tool where you can enter your zip code and see the local, state and federal incentives that apply to a given heat pump.
Is the heat pump worth it?
It all depends on your personal situation.
“A lot of people don’t think about their HVAC,” Davis said. But if you have an older heating system, now is a great time to start thinking about a new heat pump.
The the technology itself has advanced a lot over the past decade, which means the new units will be highly efficient and can save you a lot of money. “You’re going to see the difference in your bill, and I think a lot of homeowners care about that,” Davis said.
Plus, a new heat pump can be a big improvement to your home’s comfort: Remember that heat pumps work as both heating and air conditioning units.
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