On Tuesday, August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. Now one of the largest legislative packages that has been moved in years, the IRA covers healthcare, climate change, and tax bill.
While the legislation has some disadvantages for small businesses and non-union HVAC contractors, there are notable benefits for both companies and customers. Among them is the incentive to transition from fossil fuels to electricity which, if paired with proper installation, service, and maintenance, could be a big win for HVAC contractors and clients alike. 
Tax Incentives
25C
This bill includes a long-term extension of the renamed Energy Efficient Home Improvement Credit (25C) tax incentive, which has been extended for 10 years. Certain HVAC equipment, such as central air conditioners and natural gas, oil or propane water heaters, hot-water boilers, and furnaces, are limited to a maximum credit of $600. Other products such as electric and natural gas heat pumps are limited to $2000. The new provision also allows up to $150 for energy audits. These incentives clearly favor fewer fossil fuels and more energy savings.
Moreover, the legislation includes an electric appliances rebate program for low and moderate-income customers and provides $500 million in Defense Production Act funding for heat pumps and tax credits for thermal energy storage.
45L
The extension of tax incentive 45L includes a $2500 credit for single-family homes acquired before January 1, 2025, that comply with the Energy Star® Single-Family Homes National Program Requirements 3.1. It also includes a $2500 credit for single-family homes acquired after December 31, 2022, that comply with the Energy Star® Single-Family Homes National Program Requirements 3.2.
179D
Air Conditioning Contractors of America (ACCA) benefit from Section 179D in the IRA. The increased tax deduction rewards the construction of energy-efficient commercial buildings, including multi-family buildings that are four stories or higher. Energy-efficient ground-up construction, along with energy-efficient retrofits of older buildings, will be eligible too.
High-Efficiency Electric Home Rebate Program
Another component of the IRA is the new High-Efficiency Electric Home Rebate Program, which provides state energy offices with funds to give low and medium-income homeowners and landlords a rebate of up to $8,000 on qualifying heat pumps. The bill also provides additional rebates to upgrade ventilation, electrical panels, and home wiring. A total of $4.3 billion has been appropriated for the rebate program, but it will be up to individual states to make the rebate available to residents.
Specific Rebates for Qualified Projects
Heat pump: $8000
Heat pump water heater: $1750
Insulation, air sealing, and ventilation: $1600
Electric wiring: $2500
Electric load service center upgrades: $4000
In addition to specific rebate limitations, the rebate is limited based on homeowner/tenant income.
