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How the Inflation Reduction Act Will Affect Heat Pump Prices

President Biden signed the Inflation Reduction Act of 2022 (IRA) on August 16, 2022, This is one of the largest measures ever taken by the federal government to address climate change. $369 billion is being invested into cleaner energy technology and improvements to energy efficiency.

The Inflation Reduction Act HVAC incentives are something you’ll want to know about and take advantage of if you are looking to install or upgrade your current heating and cooling system or make related improvements in your home.

What Upgrades are Covered by the IRA?

  • Heat pump HVAC -$8000
  •  Heat pump water heater- $1750
  •  Electric stove – $840
  •  Heat pump clothes dryer – $840
  •  Breaker box – $4000
  • Electrical wiring upgrade – $2500
  •  Insulation/ventilation – $1600

HEEHRA Explained

The High-Efficiency Electric Home Rebate Act (HEEHRA) is the portion of the IRA that includes the financial incentives for heat pump purchases. If you qualify, you can get an instant rebate for as much as $8,000 on any heat pump you choose right when you make your purchase. 

This means no paperwork for refunds. Your incentive is taken right off the top of the price. The amount you are allowed under HEEHRA depends on your household income and the heat pump model you purchase.

How Much Am I Qualified to Receive?

Households earning 80% or below of the median income for your area will receive the full rebate amount of $8,000. Those with an income that falls above 80% up to 150% of the median income for your area will receive 50% of this amount or $4,000. 

The area income for Maricopa County is currently around $88,800, so households with an income of $71,400 or below will qualify for the full rebate while those above this amount but below $133,200 will qualify for half.

Even those who don’t meet these income requirements are eligible for some incentives. If your income surpasses 150% of the median income for your area, you can still claim up to a 30% tax credit, not to exceed $2,000, for the purchase of a new heat pump. You can also lay claim a tax credit for HVAC replacement for 2022 if you installed a heat pump before the new year.

The rebate is especially useful for low-income homeowners, as the rebate provided exceeds the average cost of a new heat pump in many cases. This means that you could be getting a new heat pump at zero cost to you.

How Will the IRA Affect Heat Pump Prices?

The IRA is intended to help reduce inflation and stabilize prices. It can affect the prices of heat pumps by influencing the cost of the materials and components that are used to manufacture them, as well as the cost of labor and transportation. Read further to learn more about the Inflation Reduction Act heat pump program and its effects.

Impact on Materials and Components

One way that the Inflation Reduction Act heat pump rebates can affect heat pump prices is by influencing the cost of the materials and components that are used to manufacture them. When the cost of these materials and components increases, manufacturers may have to raise the prices of their heat pumps to compensate. This is because the cost of producing heat pumps is directly tied to the cost of the materials and components used to make them.

Impact on Labor and Transportation

Another way that the Inflation Reduction Act heat pump incentives can affect heat pump prices is by influencing the cost of labor and transportation. When the cost of labor and transportation increases, manufacturers may have to raise the prices of their heat pumps to compensate. This is because the cost of producing heat pumps is directly tied to the cost of labor and transportation.

Impact on Competition

The inflation reduction act also can have an impact on competition within the industry, by providing a more stable economy, it will open the market for new entrants, creating more competition, this competition can lead to lower prices for the consumers.

Heat Pump Usage

Heat pumps have traditionally been more popular in southern states where the climate is milder during the winter. Earlier heat pumps were not designed to function well in extremely cold climates, so they have not previously been a great option for Northern climates. 

However, the latest heat pump technology allows them to operate even in temperatures well below zero. They can also be used as a backup with an existing HVAC system and still qualify for IRA incentives.

Why is the IRA Funding Heat Pumps?

The IRA was passed to help fund emerging renewable energy systems including solar, wind, and hydropower. These energy sources produce zero carbon emissions, qualifying them as green energy. It is all a part of the government’s efforts to move away from fossil fuels such as gas and increase the use of clean energy supplies. 

A huge step toward making this happen is providing homeowners with incentives to upgrade to more energy-efficient appliances and systems.

What Are the Benefits of a Heat Pump?

In addition to being more energy efficient to operate, heat pumps have some other advantages over their traditional heating system counterparts.

  • Energy Efficiency: Heat pumps are much more energy efficient than traditional furnaces because they use electricity to move heat, rather than generate it.
  • Cost Savings: The increased energy efficiency of heat pumps can lead to significant cost savings on monthly heating bills.
  • Versatility: Heat pumps can be used for both heating and cooling, making them a versatile option for year-round temperature control.
  •  Longer Lifespan: Heat pumps have a longer lifespan than traditional furnaces, as they have fewer moving parts and don’t experience the same level of wear and tear.
  • Environmentally Friendly: Because heat pumps use electricity rather than fossil fuels, they are considered a more environmentally friendly option for heating and cooling.
  • Quiet Operation: Heat pumps tend to be much quieter than traditional furnaces.
  • Zoning: Heat pumps can be used with zoning systems, which allow you to control the temperature in different areas of your home separately.

How to Get Your Heat Pump Rebate

HEEHRA rebates have been given to state governments to dole out to their citizens. Currently, the mechanism for claiming rebates has not been established. It is expected to be in place in Spring 2023, with the Department of Energy issuing guidelines to states once they are set and the rebates being made available shortly after that.

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