IRA Overview

• High-Efficiency Electric Home Rebate Program
  

  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.

  • - Rebates amount is up to 50% of the cost for households with income of 80–150% of Area Median Income and up to 100% of cost for those under 80% of Area Median Income.
  • - There are maximum incentives for each type of equipment as well as a $14,000 per household cap. the max for heat pumps is $8,000.
  • - Contractor rebate eligibility up to $500.
  • - Must replace a non-electric appliance or new construction or first-time purchase of that appliance.
  • - Qualifying Heat Pumps must be ENERGY STAR V6.1 certified

  See Area Median Income in your area
• Home Energy Performance-Based Whole-House (HOMES) Rebates
  

  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.

  • Modeled 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.

  • Measured Savings

    

    - 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.

• Energy Efficient Home Improvement Credit (25C)
  

  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.

  • - In 2022 the credit is under the old rules, with lower amounts and a lifetime cap of $500.
  • - Qualifying product must meet CEE highest tier excluding any advanced tier.
  • - The credit is taken on tax returns and is only available to homeowners (for their principal residence).
• Energy Efficient Commercial Building Deduction (179D)
  

  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.

  • - Energy projects that reduce energy use by a minimum of 25% are eligible.
  • - For nonprofits and federal buildings, the deduction may be transferred to the project company or responsible party.
  • - Unlike a tax credit which reduces the tax owed. This is a deduction which reduces the taxable income.
  • - Deduction amount of $0.5 per sq. ft. for 25% energy reduction, increases by 0.02 per sq. ft. for every percentage above 25% reduction up to a max. $1 per sq. ft.
  • - If the contractor meets the prevailing wage and apprentice requirement the amount increases to $2.5 per sq. ft. for 25% energy reduction and increases by $0.1 per % reduction over 25% up to a max of $5 per sq. ft.