A key element in President Biden's Inflation Reduction Act offers significant rebates and tax credits for people who make their homes more energy efficient.
Here's what to know about the incentives.
The HOMES Rebate Program covers upgrades to that home that make it more energy efficient. Think big-ticket items like solar panels, new windows, heat pumps, etc. The amount of the rebate is based on the energy savings an upgraded home will achieve. For example, cutting the home’s energy usage by at least 35% can get you up to $4,000 in rebates. That amount is doubled to $8,000 for low- and middle-income households.
The High-Efficiency Electric Home Rebate Act (HEEHRA) provides rebates for low- and middle-income families to electrify their appliances. Specifically, HEEHRA would provide the following rebates on these certain appliances:
- $1,750 for a heat pump water heater
- $8,000 for a heat pump for space heating and cooling
- $840 for electric stoves, cooktops, ranges, ovens and electric heat pump clothes dryers
- $4,000 for an electric load service center upgrade
- $1,600 for insulation, air sealing and ventilation
- $2,500 for electric wiring
There's a $14,000 cap on the dollar amount of rebates offered under the program. Low-income homeowners can get up to 100% of electrification projects covered — up to the cap of $14,000 in rebates — while middle-income individuals can get up to 50% of their costs covered by the rebates (also up to that $14,000 cap).
The HEEHRA rebates are slated to be available at the point-of-sale, so homeowners will realize the savings when they purchase the item(s) at the store.
Note that you can only claim one rebate per improvement (no double dipping).
The Inflation Reduction Act expands a homeowner efficiency tax credit, called the Energy Efficient Home Improvement Credit, to cover up to 30% of the cost of energy upgrades, with a cap of $1,200 per year.
This tax credit was previously available to homeowners, but it was a lifetime credit, meaning you could claim it only once. The Inflation Reduction Act makes the credit an annual incentive, so you can claim it for upgrading windows one year and buying a heat pump the following year.
Tax credits will be realized only when an individual files their taxes, not at the time of the upgrade.
How do I claim these rebates and credits?
Hang tight on purchases for now. It will likely take months for the programs to be live. The HOMES rebate program, for example, will be administered by each state, and it will take them awhile to implement their plans. Likewise, the point-of-sale rebates provided by the HEEHRA will also require a massive amount of coordination between government and retailers.
However, you might want to start thinking about the energy efficient upgrades you want to make to your home and begin talking to contractors about your options.
If you have questions to the rebates or credits for energy efficient home improvements, we’re here to help.