Federal Tax Credit

Federal Tax Credits

Important Information regarding the Inflation Reduction Act of 2022 can be found here.

The Consolidated Appropriations Act of 2021 retroactively extended the previous section 25C tax credit through December 31, 2022. Starting January 1, 2023 the Energy Efficiency Home Improvement Credit under the Inflation Reduction Act of 2022 expanded section 25C increasing tax credits for eligible residential equipment up to $2000.

NONBUSINESS ENERGY PROPERTY CREDIT

WATER HEATING

The U.S. Internal Revenue Service (IRS) is also providing Consumers with a tax credit under extended section 25C on high-efficiency water heating equipment. The Rheem^® Water Heating Division of Rheem Manufacturing Company certifies that the water heating models listed here meet the criteria for the federal credit of $300 for ENERGY STAR^® certified gas water heaters with UEF>=0.82 or Hybrid Heat Pump Water Heater with UEF>=2.2.

INSTALLATIONS Jan.1, 2023 to Dec. 31, 2032

Beginning 2023, the expanded version of 25C, now called the Energy Efficient Home Improvement Tax Credit (under the Inflation Reduction Act of 2022) will provide up to $2,000 in tax credits for qualifying high efficiency water heaters as well as credits for electrical upgrades. Unlike the existing program, the expanded 25C tax credit has generous annual limits (not lifetime limits), meaning that the same customer could receive the credit for qualified energy efficient upgrades annually. This expansion will extend the program out to 2032.

Here’s what you need to know about these tax credits:

What equipment qualifies for the credits?

High-efficiency water heaters, furnaces, boilers, heat pumps, central air conditioners, building insulation, windows, roofs, biomass stoves, and circulating fans used in qualifying gas furnaces. Please see the chart below, which details the qualifying Rheem equipment.

When do these tax credits expire?

Under the Consolidated Appropriations Act of 2021 extended section 25C tax credit through December 31, 2022. 

Beginning 2023, the expanded version of 25C, now called the Energy Efficient Home Improvement Tax Credit (under the Inflation Reduction Act of 2022), will extend the program out to 2032. 

What’s the maximum amount that a homeowner can receive in tax credits?

The maximum amount an eligible homeowner may receive in tax credits for improvements is $500. If you have already claimed credits of $500 or more from improvements in an earlier year, you are ineligible to claim new credits. This extension ends Dec.31, 2022.

Beginning 2023, the expanded version of 25C will provide up to $2,000 in tax credits for qualified high efficiency water heaters as well as credits for electrical upgrades. Unlike the existing program, the expanded 25C tax credit has generous annual limits (not lifetime limits), meaning that the same customer could receive the credit for qualified energy efficient upgrades annually. This expansion will extend the program out to 2032.

Can these tax credits be applied to energy-efficient equipment purchased for a second home?

In order for purchases of high-efficiency heating, cooling and water heating equipment to be eligible for this tax credit, the equipment must be installed in an existing primary residence that is owned and used by the taxpayer. New construction and rentals do not apply.

What do I need to do to take advantage of these tax credits?

You should obtain a Manufacturer’s Certification Statement, which is a signed statement from the manufacturer certifying that the product or component qualifies for the tax credit. Taxpayers must keep a copy of the certification statement for their records, but do not have to submit a copy with their tax return.

The Rheem Heating & Cooling Federal Tax Credit Manufacturer’s Certification Form can be downloaded here.
2022 The Rheem^® Water Heating Division Federal Tax Credit Manufacturer’s Certification Form can be downloaded here.
2023 The Rheem^® Water Heating Division Federal Tax Credit Manufacturer’s Certification Form can be downloaded here.
You can also download the proper IRS form here.

Homeowners must submit IRS Form 5695 and meet all federal tax credit requirements to qualify. Tax credit is limited to an existing home and must be the homeowner’s primary residence. New construction and rentals do not apply. Any tax credit that exceeds the consumer’s regular tax liability for the taxable year may not be refunded nor carried forward under Section 25C. Please consult with a tax professional for complete details.

Where can I find out more information about these tax credits?

ENERGY STAR has more information here for tax credits that apply retroactively 1/1/2022 through 12/31/2022. 

Note: State, Local and Utility rebates may still be available in your respective markets for residential energy products. Please visit the “Rebate Center” for a list of energy efficiency tax credits by zip code.