The Inflation Reduction Act was signed into law by President Biden in August of 2022. It is the largest climate investment act in US history, allocating $369 billion to go towards reducing greenhouse gas emissions and investing in renewable energy sources, among others.
Timeline of Tax Credits as of January 1, 2023
- A new Colorado State Tax Credit and Sales Tax exemption for heat pumps and heat pump water heaters is now available! The tax credit (10%) and sales tax exemption (2.9%) add up to an additional 12.9% discount on the price of the equipment, not including installation charges.
- Colorado EV Tax Credit provides up to $2,000 state tax credit for new electric vehicles and up to $1,500 for a 2-year lease. Visit Drive Electric Colorado’s website for more information as well as the State’s CO FYI Income 69.
- Note: if you are a customer in Xcel Energy’s service territory, be sure to contact the utility to explore their income-qualified rebates for EVs ($5,500 new and $3,000 used) and determine if you want to pursue the utility rebate or the state tax credit; you cannot get both.
- The Energy Efficient Home Improvement credit (25C) provides households a 30 percent tax credit for home improvement projects, including installing heat pumps, insulation, and, importantly, upgrading electrical panels to accommodate the additional electric load.
- Total 25C tax credits across panel upgrades and all weatherization projects are capped at $1,200 per year. Heat pumps and heat pump water heaters are subject to a separate 25C cap of $2,000 per year. The credit resets each tax year, effectively becoming available again for additional projects.
- Residential Clean Energy credit (25D) provides households with an uncapped 30 percent tax credit for rooftop solar, battery storage, or geothermal heating installations.
- Federal EV Tax Credit provides up to $7,500 federal tax credit for new EVs, yet income requirements, vehicle purchase price, and manufacturing and assembly requirements must be met. Up to $4,000 or up to 30% of the vehicle price (whichever is lower) for used EVs, with purchase and income requirements as well. Visit Drive Electric Colorado’s website for more information and Drive Electric Colorado offers FREE EV coaching that can help you navigate the available incentives at the state, federal, and utility levels. Please be sure to consult with your tax advisor and dealership to understand what you qualify for and which vehicle models meet the current federal tax incentive requirements.
- High-Efficiency Electric Homes Rebate Act (HEEHRA) will provide point-of-sale rebates to enable low- and moderate-income households to electrify their homes (up to $14,000 per household). Qualified electrification projects include heat pump HVAC systems, heat pump water heaters, electric stoves and cooktops, heat pump clothes dryers, and enabling measures such as upgrading circuit panels, insulation, air sealing, ventilation, and wiring.
- Whole Home Energy Reduction (Hope for Homes) will offer rebates for energy efficiency retrofits that are modeled to achieve or have achieved verifiable minimum energy use reductions. Qualifying households can receive up to up $4,000 and qualified low-income households (less than 80 percent of Area Median Income) can access doubled up to $8,000
Under the Inflation Reduction Act, federal income tax credits for updating to energy efficient home equipment will be available through 2032. A wide range of Energy Star-certified equipment is eligible for tax credits, anything from Air Source Heat Pumps to Small Wind Turbines.
Taking advantage of tax credits, along with available rebates, is a good way to help make the transition to a clean energy future more affordable Most of the six elements of an ENERGY STAR Home Upgrade are covered.
How much money will you get with the
Inflation Reduction Act?
Interested to see how much money you could get from the Inflation Reduction Act? Visit Rewiring America’s savings calculator tool. The calculator allows you to see personalized incentives that can help you in your transition to clean energy.
High-Efficiency Electric Home Rebate Act (HEEHRA)
The High-Efficiency Electric Home Rebate Act (HEEHRA) provides point-of-sale consumer rebates to enable low- and moderate-income households across America to electrify their homes. HEEHRA will help American families save money on their monthly energy bills, create healthier indoor air environments, and reduce their carbon emissions.
HEEHRA is a voluntary program that covers 100 percent of electrification project costs (up to $14,000) for low-income households and 50 percent of costs (up to $14,000) for moderate-income households. Qualified electrification projects include heat pump HVAC systems, heat pump water heaters, electric stoves and cooktops, heat pump clothes dryers, and enabling measures such as upgrading circuit panels, insulation, air sealing, ventilation, and wiring. Project costs will cover both purchase and installation costs. And, notably, these point-of-sale rebates will act as off-the-top discounts when a household makes the purchase.
This historic legislation was included in the Inflation Reduction Act (IRA) of 2022. The original Senate bill — the Zero-Emission Homes Act (ZEHA) of 2021 — was introduced by Senator Heinrich (D-NM), and its House companion was introduced by Representatives Tonko (D-NY) and Castor (D-FL).
Whole Home Energy Reduction Rebates (HOMES)
The Whole Home Energy Reduction Rebates (HOMES) are designed to reward energy efficiency retrofits that are modeled to achieve or have achieved verifiable minimum energy use reductions.
More information is available here.
Frequently Asked Questions
The following are questions and answers regarding home energy rebate programs administered by the U.S. Department of Energy and funded by the Inflation Reduction Act. For more information, please visit the Home Energy Rebate Programs page.
All materials come from the Office of State and Community Energy Programs website.
President Biden signed the landmark Inflation Reduction Act into law on August 16, 2022. The law authorizes $369 billion in spending on energy and climate change, including roughly $35 billion in clean energy investments managed through the U.S. Department of Energy (DOE). The Inflation Reduction Act represents the single largest investment in tackling the climate crisis and investing in clean energy in U.S. history.
The Inflation Reduction Act of 2022 includes two provisions authorizing $8.8 billion in rebates for home energy efficiency and electrification projects. These two provisions are:
- Section 50121: Home Energy Performance-Based, Whole House Rebates (Referred to as Home Efficiency Rebates).
- Section 50122: High-Efficiency Electric Home Rebate Program (Referred to as Home Electrification Rebates).
Together, these provisions are referred to as the Home Energy Rebates. These provisions authorize the following:
- $4,300,000,000 in grants to State Energy Offices to carry out Home Efficiency Rebates. Section 50121 of the Inflation Reduction Act authorizes rebates based on the energy savings predicted from a home energy upgrade.
- $4,275,000,000 in grants to State Energy Offices to carry out Home Electrification Rebates. Section 50122 of the Inflation Reduction Act authorizes rebates based on purchase or installation of high-efficiency home appliances and equipment.
- $225,000,000 in grants to Indian Tribes to carry out Home Electrification Rebates. Section 50122 of the Inflation Reduction Act authorizes rebates based on purchase or installation of high-efficiency home appliances and equipment.
Congress has structured these rebate programs to be administered by State Energy Offices and Indian Tribes, with the U.S. Department of Energy (DOE) providing guidance and oversight. A portion of funds authorized through the Inflation Reduction Act may be used by states and Indian Tribes to administer these programs.
DOE is developing a timeline for fund distribution for these provisions and recognizes the importance of rapidly making funds available. DOE has the following tentative timeline for initial actions:
- Continue key stakeholder engagement activities to guide content for a Request for Information regarding these provisions.
- Release the Request for Information for public comment in January 2023.
- Receive and process information from the Request for Information through March 2023.
- Publish guidance to states and Indian Tribes in Summer 2023.
No. Once DOE has made funds available to states and Indian Tribes, those entities will then be responsible for setting up and administering programs.
Households looking for home energy retrofit assistance today cannot yet access these rebates but may be eligible for other federal programs, including tax credits or the Weatherization Assistance Program, as well as other state, local, and utility programs.
Once DOE has made funds available to states and Indian Tribes, those entities will then be responsible for setting up and administering the programs that make the rebates accessible to households. It is likely that program rollouts will vary across states, but generally, DOE expects households to be able to access these rebates in much of the country in late 2023/early 2024.
The amount of money available for Home Energy Rebates varies depending on:
- Per-household rebate limits established by the law and program administrators
- What technology or technologies are being installed in the home,
- Whether or not the project has estimated energy savings, and how those energy savings are calculated,
- The household’s income, and
- The total project cost.
The table below summarizes the maximum allowed rebate amounts defined in the law for different types of home efficiency and electrification projects. Note that an installed technology may be eligible for rebates either because of its predicted energy savings or because of its inclusion on the qualified electrification project technologies list, but not for both reasons in a single household.
*Maximum rebated costs for Home Electrification Project Qualified Technologies
- ENERGY STAR electric heat pump water heater—up to $1,750
- ENERGY STAR electric heat pump for space heating & cooling—up to $8,000
- ENERGY STAR electric heat pump clothes dryer— up to $840
- ENERGY STAR electric stove, cooktop, range, or oven—up to $840
- Electric load service center—up to $4,000
- Electric wiring—up to $2,500
- Insulation, air sealing, and ventilation—up to $1,600
The law specifies that home efficiency rebates are available to “individuals and aggregators carrying out energy efficiency upgrades of single-family homes… [and] multifamily buildings.” These rebates are available to households of any income. For households with a total annual income below 80 percent of the area median income, rebates can cover a higher percentage of the total project costs.
The law also specifies that home electrification rebates are available to (1) low- or moderate-income households, (2) entities that own a multifamily building with low- or moderate-income households comprising at least 50 percent of the residents, and/or (3) organizations that are carrying out projects for low- or moderate-income households. A low- or moderate-income household is one where an individual or family which has a total annual income less than 150 percent of the median income of the area in which the individual or family resides. The Department of Housing and Urban Development reports area median income statistics across the United States.
Home electrification rebates may cover up to 100% of a total qualified electrification project’s cost for households with a total annual income less than 80 percent of the area median income.
DOE recognizes the importance of coordinating various programs that will support homeowners and residents to maximize the benefits of these programs and protect against duplication of rebates for single projects, as required by Congress. Through guidance and technical assistance, DOE will support State Energy Offices and Indian Tribes in navigating how funds from these rebate programs may be coordinated with other new and existing programs and incentives. Some (illustrative, but not exhaustive) examples of these federal and state programs are listed below.
- Home Energy Efficiency Tax Credits: There are currently available tax credits for many types of energy efficient home equipment and products. The IRA authorized an increase of tax credit incentives from 10% to 30% of project cost to begin starting January 1, 2023. Specific guidance related to these credits will be published by Department of Treasury and the Internal Revenue Service. Starting January 1, 2023, there will also be a new tax credit for electric panel upgrades.
- Energy Efficiency Revolving Loan Fund Capitalization Grant Program: The Bipartisan Infrastructure Law includes $250 million for the establishment of the Energy Efficiency Revolving Loan Fund Capitalization Grant Program (EE RLF Program) for energy efficiency retrofits in U.S. homes and commercial buildings.
- Weatherization Assistance Program: This program began in 1976 and helps low-income households reduce their energy costs by increasing home energy efficiency. In addition to annual appropriations, the Bipartisan Infrastructure Law authorized $3.16 billion for Weatherization Assistance Program home retrofits. Households with an annual income less than 200% the federal poverty level may be eligible for this program.
For existing utility programs, DOE is collaborating with utilities to better understand how the program guidance can be developed to provide integrated and streamlined offerings. To learn if you are currently eligible for rebates through utility programs, contact your local utility.
The funding to be allocated to the states through their State Energy Offices can be found in these two provisions. DOE has not yet released information on the amount of funds individual Indian Tribes may access through these provisions.
The law specifies that DOE shall reserve funds for each State Energy Office in accordance with the allocation formula for the State Energy Program (SEP) in effect on January 1, 2022. Read more about the SEP allocation formula.
For the home electrification rebates, the law specifies that DOE shall reserve funds for Indian Tribes in a manner determined appropriate by the Secretary. No determination has been made regarding the implementation of this subclause at this time, and DOE will seek consultation with Indian Tribes through this determination process. In the context of this rebate program. The law also specifies that the term “Indian Tribe” has the meaning given to the term in the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304(e)).
Formula funds for each State Energy Office and Indian Tribe will be reserved and awarded depending on the successful submission of complete applications to DOE.
The Inflation Reduction Act authorizes states to provide rebates for Home Efficiency Rebates begun on or after the enactment of the law. Given that states must establish programs that ensure compliance with the law (e.g., eligibility of household, technology, program reporting), it will be difficult to offer rebates for projects completed before program requirements are fully defined and programs are in place.
If a state is interested in offering rebates retroactively – that is, for projects completed before the state’s program is established, the state’s application to DOE will need to outline how the state will determine if these projects meet all program requirements. DOE plans to issue program guidelines in Spring 2023, after which states can submit their applications for DOE’s review.
The law does not authorize States to offer Home Electrification Rebates retroactively.
Qualified electrification projects under Section 50122 (Home Electrification Rebates) include the purchase and installation of at least one of the following upgrades:
- ENERGY STAR electric heat pump water heater
- ENERGY STAR electric heat pump for space heating and cooling
- ENERGY STAR electric heat pump clothes dryer
- Electric load service center
- Electric stove, cooktop, range, or oven
- Air sealing and materials to improve ventilation
- Electric wiring
The U.S. Environmental Protection Agency has a fact sheet on ENERGY STAR Certifications that are relevant to the Home Electrification Rebates.
DOE intends to post a Request for Information and will include a question about other technologies that State Energy Offices and Indian Tribes may be interested to include with installations of listed technologies.
DOE staff is identifying outreach opportunities, including participation in conferences and stakeholder-led meetings. A series of listening sessions will occur in January 2023, when the Request for Information is anticipated to be released (see FAQ #4). DOE is committed to engaging a wide array of organizations, including direct engagement with states and Indian Tribes, to collect input on program design.