The Inflation Reduction Act, signed into law on August 16, 2022, offers residential homeowners up to $14,000 in tax credits and direct cash rebates as incentives to make their homes more energy efficient. These incentives are part of a larger set of programs designed to help the U.S. achieve its goal of lowering fossil-fuel emissions to reduce climate change.
When Do Inflation Reduction Act Tax Credits and Rebates Start?
Inflation Reduction Act tax credits are already in effect and can be taken on your 2022 taxes. They are an extension of the Nonbusiness Energy Property Credit that the Inflation Reduction Act reactivated for 2022. It allows homeowners to claim tax credits for energy efficiency improvements such as heat pumps, air conditioners, solar panels, insulation, and exterior windows and doors. Starting in 2023, the Nonbusiness Energy Property Credit will be replaced by the Energy Efficient Home Improvement Credit. These tax credits will be expanded and increased and will be in effect through 2032.
Inflation Reduction Act Rebates
Two rebate programs will start in 2023, which will provide point of purchase rebates and money back on energy saved when purchasing energy-efficient heat pumps and appliances depending on your household income.
1. High-Efficiency Electric Home Rebate Act (HEEHRA)
The High-Efficiency Electric Home Rebate Act (HEEHRA) is a rebate program starting in 2023 that encourages homeowners to switch to electric home appliances and heat pump air conditioning, heating and water heater systems. These rebates will occur at point of sale, and will be a discount of up to 100% of the purchase cost.
If your household income is 80% below your area’s median income, you receive the maximum rebate, covering your new equipment at 100% up to $8,000. If your household income is 81-150% of your area’s median income, you’ll receive up to 50% of the heat pump’s cost.
To look up your area’s median income, use Fannie Mae calculator.
State governments will execute the HEEHRA rebates. The Department of Energy (DOE) will likely issue state guidelines in spring 2023. If you can’t wait until then, there is currently a lesser $300 tax credit for heat pumps that meets the Consortium for Energy Efficiency (CEE)’s top-tier efficiency standards. Hawai’i Energy is also offering instant rebates on energy efficient central air conditioners, mini split ductless air conditioners, and air conditioning tune-ups.
2. Home Owner Managing Energy Savings (HOMES) Rebate Program
The Home Owner Managing Energy Savings (HOMES) Rebate Program gets you cash back when lowering your home energy usage. The amount of money you receive depends on how much energy you’ve saved, how you prove those energy savings, and your household income. Plus, low- and moderate-income households qualify for double the rebate amount and are eligible for up to 80 percent of project costs. That’s $8,000 max if you cut energy use by 35 percent and $4,000 max if you cut energy use by 20 percent.
Now is the Time to Take Advantage of Tax Credits and Rebates
Given the significant cost savings to homeowners by the Inflation Reduction Act, there has never been a better time to upgrade your home’s energy efficiency. The experienced comfort advisors at Steve’s Plumbing & AC can guide you on how to maximize the tax credits and rebates afforded you through these programs. Call us today to schedule a free proposal on a new energy-efficient air conditioner, heat pump or water heater, and enjoy lower energy bills and reduce global warming with an energy-efficient home.