Energy Efficient Home Improvement Credit -- How NC & SC Homeowners Save on HVAC
If you are replacing your HVAC system in 2025, you may be leaving money on the table. The federal Energy Efficient Home Improvement Credit -- part of the Inflation Reduction Act -- allows homeowners to claim up to 30% back on qualifying HVAC equipment, including heat pumps, high-efficiency furnaces, and central air systems.
Here is what NC and SC homeowners need to know before their next installation.
Disclaimer: This article is for informational purposes only. Always consult a tax professional to confirm eligibility and how credits apply to your specific situation. Visit IRS.gov for official guidance.
What Is the Energy Efficient Home Improvement Credit?
Previously known as the Nonbusiness Energy Property Credit, this federal tax credit was expanded significantly under the Inflation Reduction Act of 2022. It applies to qualifying energy-efficient home improvements made between January 1, 2023 and December 31, 2032.
The credit is worth 30% of the cost of qualifying improvements, up to specific annual limits.
HVAC Equipment That Qualifies
| Equipment Type | Credit Amount | Annual Limit |
|---|---|---|
| Heat Pumps (air source) | 30% of cost | $2,000 |
| Heat Pump Water Heaters | 30% of cost | $2,000 (combined) |
| Central AC (high efficiency) | 30% of cost | $600 |
| Gas Furnace (high efficiency) | 30% of cost | $600 |
| Home Energy Audit | 30% of cost | $150 |
Note: The $2,000 limit for heat pumps is separate from the $1,200 limit that applies to other improvements like insulation, windows, and doors. This means a homeowner replacing their HVAC with a qualifying heat pump could potentially claim up to $3,200 in a single year.
Efficiency Requirements for NC & SC
Not every HVAC system qualifies. The equipment must meet specific efficiency thresholds set by the IRS and ENERGY STAR. Here is what to look for:
- Air-source heat pumps: Must meet ENERGY STAR Most Efficient certification or have a HSPF2 of 7.5+ and EER2 of 10+
- Central AC: Must meet ENERGY STAR Most Efficient certification (SEER2 of 16+ in most cases)
- Gas furnaces: Must have AFUE of 97% or higher (this is very high efficiency -- most standard furnaces do not qualify)
Important for NC & SC: Because of our climate zone (South region), the efficiency requirements for qualifying equipment may differ slightly from northern states. Make sure the equipment your contractor installs is specifically listed as qualifying for the IEA tax credit in Climate Zone 2-3.
How to Claim the Credit
- Keep all receipts and documentation from your HVAC installation
- Get the manufacturer certification statement that confirms the equipment qualifies
- File IRS Form 5695 (Residential Energy Credits) with your federal tax return
- The credit reduces your tax liability directly -- it is not a deduction
What This Means in Real Numbers
If you install a qualifying heat pump system in Charlotte or Rock Hill for $6,000, the 30% credit would be $1,800 -- but capped at the $2,000 annual limit for heat pumps. That effectively brings your net cost down to $4,200 before any state incentives.
Combined with potential utility rebates from Duke Energy or Dominion Energy (depending on your area), the savings can be substantial.
State and Utility Incentives in NC & SC
Beyond the federal credit, check for additional incentives:
- Duke Energy NC: Rebates available for ENERGY STAR heat pumps and high-efficiency AC units
- Dominion Energy SC: Smart Energy rebates for qualifying HVAC upgrades
- NC GreenPower: Additional incentives for renewable energy and efficiency improvements
These change frequently -- check your utility provider is website or ask us when you request your quote.
How BULK Can Help
We install qualifying heat pumps and high-efficiency AC systems from Carrier, Lennox, Trane, Mitsubishi, Daikin, and other ENERGY STAR certified brands across NC and SC. When you request a quote, tell us you are interested in tax credit-qualifying equipment and we will make sure to include options that meet the thresholds.
We also provide the documentation you need for your tax filing -- equipment model numbers, efficiency ratings, and installation receipts.