Signed into law in August 2022, the multibillion Inflation Reduction Act is the single largest investment in climate and energy in American history. The IRA was designed to carry out more high-efficient, electric appliances in homes and commercial buildings resulting in lower energy costs and overall reduction in carbon footprint. In this article we will outline the available tax credits and rebate programs, who they benefit, what building structures are eligible, and how to get your cost savings.
|Who Benefits||What is Eligible||How Much||How To Get||When|
|High-Efficiency Electric Home Rebate Program||Residents and building owners with income less than 150% of Area Median Income||Certain ENERGY STAR® Electric Appliances Weatherization of homes Electric panel upgrades||50% of project cost for medium income households and 100% of project for low income households up to $14,000 total with Sub caps – for heat pumps the max is $8,000||Rebates via State Energy Offices and Tribes DOE will administer the program and distribute money to State Energy Offices and Tribes||After DOE guidance and State plans Until 9/30/2031|
|Home Energy Performance-Based Whole-House (HOME) Rebates||Homeowners and landlords, all income levels (or aggregators)||Whole-home retrofit projects that reduce energy use at least 15%||Two Paths – Modelled and Measured Savings $2,000 for min. 20% and $4,000 for 35% modeled savings. Amount doubles for low & mod. Income OR Measured Approach payment is prorated per $/KwH based on $2,000 for 20% savings at least 15% savings required Limit of 50% of project cost. Rebate doubles for low or mod. Income and limit increases to 80%||State Energy Offices must apply to DOE and develop the program and implement it Currently we do not have details of the implementation of the rebate program||After DOE guidance and state plans For retrofits completed by 10/1/2031|
|Energy Efficient Home Improvement Credit (25C)||Homeowners for their principal residence||Efficient equipment and components, energy audits||30% of cost up to $2,000 for heat pumps meeting highest CEE Tier||Via tax return||From 2023 till 2032 Lower amounts for 2022|
|Energy Efficient Commercial Building Deduction (179D)||Owners of commercial and large multifamily buildings. Nonprofits and government owners can transfer deduction||Retrofit projects that reduce building energy use at least 25%||$0.50–5 per sq. ft. of floor area based on energy savings and labor standards||Via tax return||From 2023 till 2032 Under current rules for 2022|
This $4.5 billion DOE program will be administered by state energy offices to provide rebates to low and moderate-income households to install ENERGY STAR® heat pumps and certain other electric equipment that does not replace the same kind of equipment. It cannot be used to replace an existing heat pump, but it can be used for new homes. The program includes apartments and single-family homes. It also includes insulation and air sealing and upgrading electric service and wires. There is an income eligibility cap of 150% of Area Median Income.
This is a $4.3B DOE program that will be implemented by State energy offices to provide rebates for whole home retrofit packages based on the reduction in home energy use. The program is available for all income levels and includes apartments.
There are two approaches to avail this rebate: modeled savings and measured savings.
- For “modeled” savings a contractor will do an energy assessment of the home, design a retrofit package, and model the savings.
- For single family homes, rebate amounts are $2,000 for 20% energy savings and $4,000 for 35% energy savings, but these are doubled for low- and medium-income households below 80% of Area Median Income.
- For the “measured” savings approach the incentive will be prorated per kilowatt-hour saved with measurement of actual savings when at least 15% savings is achieved.
- There is a limit of up to 50% of project cost.
- For households with income less than 80% of area median income, the rebate amounts doubles and limit increases to 80% of project cost.
- Contractor performing the job can get a $200 rebate for each home located in underserved community.
This is a long-standing federal tax credit for home energy improvements that is expanded and extended in IRA. It is a tax credit for improvements such as insulation, windows, heating and cooling systems, and electric breaker box upgrades. Starting in 2023, IRA increases the credit to 30% of cost, with an annual cap of $1,200 for certain smaller appliances but it allows up to $2,000 for a heat pump.
This is a long-standing federal tax provision that IRA made more generous. IRA provides tax deductions of $0.50–5.00 per square foot of floor area to owners of new and improved energy-saving commercial buildings depending on the percentage of energy savings and whether the contractor pays prevailing wages.
The term ‘‘low- or moderate-income household’’ means an individual or family the total annual income of which is less than 80% for HOMES rebate or 150% for HEEHRA rebate, of the median income of the area in which the individual or family resides, as reported by the Department of Housing and Urban Development (HUD).
A community located in a zip code that includes one or more census tracks that include a low income community, a community of racial or ethnic minority concentration, or the Department of Energy can designate a community based on disproportionate social, economic, or environmental conditions.
The Department of Energy will allocate money to the state energy offices to administer the federal rebate programs.
State energy offices must apply for the grant amount with the Department of Energy. DOE will reserve funds for each State energy office in accordance with the allocation formula for the State Energy Program in effect on January 1, 2022.
The law requires DOE to issue detailed procedure and guidelines for modeled savings using Standard BPI 2400. For before and after actual verified savings the law tells DOE to specify open sourced advanced measurement and verification software. We expect DOE to issue detailed guidelines by mid 2023.
You can only get one federal rebate program for a qualifying project. But you may be able to combine a federal rebate with a tax incentive – 25C for residential and 179D for commercial.
DOE is in the process of establishing the guidelines and procedures to administer the grant program for State Energy Offices. There is no published timeline for when this will be complete but in general we can expect that sometime mid 2023 is when we will have more definition around the details of the Federal Rebate programs. The 25C tax credit will be available 2023 onwards and 179D tax deduction will be at current levels in 2023 and at the new levels from 2023 onwards.
A tax credit reduces the tax owing by the credit amount, whereas tax deduction reduces the taxable earnings and hence depending on your tax bracket the net tax benefit is lower equal to the deduction amount multiplied by your tax rate. You should consult a tax professional for details.
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This award is given to appliances that have been recognized as groundbreaking innovations by offering new ways to save energy.
The EPA bestows the Most Efficient Distinction to products that meet criteria even more stringent than ENERGY STAR certified.
Samsung was the only company in nine years to receive this rare award for our wide-scale commitment to sustainability.