2024 Federal Tax Credits for High-Efficiency Heating System Installations: What Montclair Homeowners Need to Know

Last Chance for Montclair Homeowners: Claim Up to $2,000 in Federal Tax Credits for High-Efficiency Heating Systems Before December 31, 2024

With winter approaching and energy costs continuing to rise, Montclair homeowners have a unique opportunity to upgrade their heating systems while maximizing savings through federal tax incentives. The Energy Efficient Home Improvement Credit, available through December 31, 2024, offers substantial financial relief for those investing in high-efficiency heating equipment.

Understanding the 2024 Federal Tax Credit Program

The federal tax credit is available for qualifying property placed in service on or after January 1, 2023, and before December 31, 2025, offering up to $2,000 per year for qualified heat pumps, water heaters, biomass stoves or biomass boilers. This represents a significant departure from previous programs that had lifetime caps of just $500.

Homeowners can claim 30% of the cost of qualifying heating system projects, for up to $2,000, and these energy efficient home improvement credits can be combined with credits up to $1,200 for other qualified upgrades made in one tax year. You can claim the maximum annual credit every year that you make eligible improvements or install energy efficient property until 2025.

Qualifying Heating Systems for Maximum Savings

Air-source heat pump systems are eligible for a non-refundable tax credit of up to $2,000, provided they meet or exceed the Consortium for Energy Efficiency (CEE) highest efficiency tier in effect as of the beginning of the calendar year the equipment is placed into service. Starting January 1, 2025, air source heat pumps that are recognized as ENERGY STAR Most Efficient are eligible for this credit, and consumers and contractors can choose either pathway regardless of the home’s location, as there is no longer a regional requirement.

Other qualifying systems include:

  • Heat pump water heaters, which allow homeowners to claim up to 30% of the cost, lowering energy bills and providing additional savings through federal tax credits
  • Biomass stoves or boilers that meet specific efficiency criteria, qualifying for a tax credit of up to 30% on the installation costs
  • High-efficiency gas furnaces with an Annual Fuel Utilization Efficiency (AFUE) rating of 97% or higher, which may qualify for a tax credit of up to 30% of the cost, capped at $600

New Jersey and Montclair-Specific Considerations

The federal Energy Efficient Home Improvement Credit provides NY and NJ homeowners with substantial savings through December 31, 2025, and a Staten Island homeowner installing a new heat pump system and upgrading insulation in the same year could claim the full $3,200 federal credit. Homeowners can maximize savings by combining federal tax credits with state and utility rebates, such as receiving a rebate from NJCEP for installing a high-efficiency heat pump and also claiming a federal tax credit for the same equipment.

Many utility providers in New Jersey, such as PSE&G, Jersey Central Power & Light, South Jersey Gas, New Jersey Natural Gas (NJN) and Atlantic City Electric (ACE) offer rebates for energy-efficient HVAC installations. These local incentives can be stacked with federal credits for maximum savings.

Important Requirements and Deadlines

You must claim the credit for the tax year when the property is installed, not merely purchased. To claim the credit, homeowners must file Form 5695, Residential Energy Credits Part II, with their tax return.

For property placed in service after December 31, 2024 and before January 1, 2026, in order for a taxpayer to claim a tax credit under Section 25C, the item must qualify for the tax credit, must be produced by a “qualified manufacturer” (a “QM”), and the taxpayer must include the QM’s PIN on its tax return for 2025 on Form 5695.

Maximizing Your Investment Strategy

If your heating or cooling system is old, and you are considering a new air source heat pump, it is always wise to optimize your attic insulation first, so you don’t pay for more heating and cooling than you actually need. Making these upgrades together in one year would allow you a tax credit of up to $1,200 for the insulation and up to $2,000 for the heat pump.

Upgrading to energy-efficient HVAC systems can lead to substantial monthly savings on energy bills, as these systems use advanced technology to heat and cool homes more efficiently, often reducing energy consumption by 20-40% compared to older models, according to the U.S. Department of Energy.

Working with Qualified Montclair Professionals

For Montclair homeowners considering a Heating Installation in Montclair NJ, working with experienced local contractors is essential for maximizing both system performance and available incentives. Adriatic Aire is the AC repair and AC installation service professionals in Montclair, serving as trusted HVAC system replacement contractors in the field of heating and air conditioning, with the tools, equipment, and experience to keep your equipment running smoothly all year long.

It’s important to engage with certified HVAC contractors familiar with New Jersey’s rebate programs and federal tax credits. Professional contractors can help ensure your equipment meets all efficiency requirements and provide the necessary documentation for both federal tax credits and local rebates.

Act Now: Time is Running Out

These incentives expire at the end of 2025, and you will be able to claim the credits when filing your 2025 taxes, but to qualify, the expense must be incurred and the product must be placed in service by December 31. For some larger projects—such as installing solar panels or upgrading your home’s heating system—it can take months to find and schedule a qualified installer and complete the work, so it’s worth getting started as soon as possible.

With significant federal tax credits available and the potential for additional state and utility rebates, 2024 represents an exceptional opportunity for Montclair homeowners to invest in high-efficiency heating systems. The combination of immediate tax savings, reduced energy costs, and improved home comfort makes this an ideal time to upgrade your heating system before these generous incentives expire.