Tax Credits and HVAC Design 

There’s no question the IRA has influenced HVAC product design. Many manufacturers at AHR showed off their latest models alongside signage for the relevant tax credits. 

“When we set about redoing our portfolio for A2L and being 2025 ready, we took into account the CE tier levels and the level of 25C incentives for customers. … We specified the product for engineering to meet specific ratings with specific split-system matchings,” said Charles Hurd, director of residential product management at Johnson Controls. 

JCI’s York HH8 18-SEER side-discharge modulating heat pump is targeted to maximize that rebate incentive, as it gets a qualifying rating with a 97% two-stage furnace. Later this year, they’ll be releasing the YH9 vertical discharge 19 SEER product, “again, getting loose coil ratings, as well as pairing with furnaces that'll come out later this year.” On the non-furnace or lighter-weight furnace end, JCI offers a staged YH6 that gets 25C-eligible credits with an air handler, allowing customers in a more southerly climate, or who aren’t looking for a dual-fuel solution, to get a more optimized price point. 

The push for electrification also brought a push for high-performance heat pumps that work well in cold climates. LG has focused on designing all-electric and dual-fuel products for climate extremes, both geographically across North America (like Alaska and Canada) and for extreme heat/cold within the same climate. 

“Being able to have a product like our award-winning heat pump allows us to not only provide heating down to -30° and beyond, but it also provides cooling to extremely high ambients — and that swing is not abnormal, if you start to think about things like snowing in Florida,” said Steve Scarbrough, senior vice president and general manager for LG Air Conditioning Technologies USA. Looking ahead, he said, “everything that we focus on will operate on clean, efficient renewable energy to be highly effective and highly efficient in all climates.” 

When Midea designed this year’s flagship high-performance system, the Evox G³, in addition to incentivizing homeowners through designing to meet the rebates, the company also introduced features designed specifically for installers. 

“We asked contractors, ‘What do you want different from other products on the market?’” said David Rames, senior product manager at Midea America Corp.  

EFFICENCY-MINDED: AHR attendees check out the Rheem Endeavor ‘Prestige’ RD18 universal heat pump. (Staff photo)

One of the responses was it needed to be easier to move. 

“Instead of a 250-pound tech hauling a 150-pound air handler up rickety attic stairs, our system, within a couple of minutes, breaks down into three easier-to-move pieces,” he said. “On average, it’s about 30 seconds per piece up the stairs or down the stairs. So in a minute and a half, we can have the whole thing up or down and put back together.” It’s just safer — not to mention, workman’s comp claims are expensive. 

The other contractor request was dealing with the pricey electrical upgrade required to swap a gas furnace for a high-performance heat pump. So Midea designed the Evox G³ with auto voltage detection. 

Gas furnaces run off of 115 voltage, while most air handlers work off of 208/230 voltage. 

“We can take that same 115V circuit from the gas furnace and hook it into our air handler,” Rames said. “It senses it and runs off of the same circuitry that the gas furnace ran off on. This will help save [the customer] money to transfer into electrification and get the gas furnace out, and they don't have to pay for the expense of electrical load.” 

The Sales Side 

How much has the IRA helped contractors sell? Manufacturers reported a mixed bag, largely because not all HVAC contractors are down for double-duty as tax advisors. 

The IRA was “a little bit of a late add” to Rheem’s high-efficiency product, so they did some redesigning to make sure it qualified for the incentive. However, the response from contractors was less than anticipated. Randy Roberts, vice president of residential a/c at Rheem. said he’s met with a lot of large HVAC contractors who were not comfortable discussing tax credits or the IRA because they didn’t understand them. 

“They were buying it at a larger amount, but not at the amount that we thought they would have,” he said. “At this point, we are still seeing the vast majority of sales going into base efficiency, which the whole industry pushing 85+% today in base. 

“I think we still absolutely have a massive education shortfall in contractor understanding,” he concluded. “There's a whole lot of contractors [who] were not comfortable giving tax advice to consumers and promising them credits a year or so out, and I think a lot of times, they just didn't push it.” 

Roberts reported that a larger chunk of electric HVAC sales are coming from products that are easy to install without changing the fuel source, like dual-fuel heat pumps. Rheem’s dual-fuel product is the RD18, and it works with nearly any R-454B HVAC system. 

“We're going to give the market what the market wants, and we're going to give heat pump solutions, but we also would highly encourage and push folks: Put a heat pump on a gas furnace and get the best of both worlds that way,” Roberts said. “It gives flexibility for the consumer and the contractor to provide comfort, which is the key thing here.” 

All this being said, homeowners will still invest in electric HVAC if it means cost savings. 

“Investing in your home, and investing in your operating costs that you can control, is something near and dear to homeowners’ hearts — something they're always willing to consider and willing to do the math on and think about for themselves,” Hurd said. 

Looking Ahead  

As of January 20, funding for the IRA is on pause after an executive order from President Trump that halted major funding initiatives tied to the clean energy movement. (Homeowners in states that have already received funding can still get the credit.) 

What happens long-term? One thing’s for certain, Hurd said: Federal energy efficiency mandates under the Trump administration will probably not get stronger.  

But that might not matter. 

“What we've been hearing from the market is, regardless of 25C credits, the majority of activity — what homeowners ask about and what contractors push — is local utility incentive rebates from your power and gas company, and those will survive,” he said. “That's still part of the mandate of local utility companies trying to … not have to build more generation capacity and live within the existing constraints of their capital equipment.” 

The CE levels will likely get adopted by those entities, perhaps with minor revisions, he said. 

Rames hopes local rebates can be based on efficiency rather than BTUs or system capacity — otherwise, oversizing could inadvertently be incentivized. That creates another problem: short cycling in the summer, which leads to humidity issues. 

States may actually wield more power than the feds to accelerate the heat pump movement, Scarbrough asserted, because they have more sway with public perception than a national program that quickly got politicized. 

“There's a lot of fantastic programs — you have the Mass Save program, the Maine heat pump program, Vermont's program — and no big shock … it's those states that were looking towards displacing fossil fuels,” he said. 

Whether it’s called “the IRA,” “electrification,” “decarbonization,” or something else, the movement is here to stay, said Scarbrough — and that’s regardless of what any given White House has to say. 

“We know we can't keep drilling and excavating,” he said. “The oil is going to run out, the coal, all this stuff is going to run out, whether it's our lifetime, our children's lifetime — it's not an endless supply. We know we have to find other alternatives. And I don't care which side of the political fence you sit on, those are just sheer facts.” 

Decarbonization goals aren’t going anywhere, either. 

“2030 is the first benchmark. It doesn't matter which administration … those are things that we already are moving forward to,” he said. “I always say the toothpaste is already out of the tube … and I can promise you LG and probably every other manufacturer in this exhibit hall is going to continue to look at ways to improve efficiency, to maximize electrification, and find those areas to be more conscious of our people and our planet.”