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The Inflation Reduction Act builds upon the strength of our energy efficiency ecosystem and accelerates all our goals. We’ll see a true transformation in the way people use energy, and everyone will benefit. Read our latest insights to get prepared with us.
This landmark piece of legislation will help every American lead a greener, cleaner life. Here are some of its history-making highlights:
Wondering how the Inflation Reduction Act will impact you? The most exciting parts are in the details. Learn more about how this historic piece of legislation will help Americans everywhere lead a greener, cleaner life.
While the IRA has something for everyone, the most extensive benefits are focused on low-and moderate-income customers (LMI). Traditionally, these folks pay much higher proportions of their household income toward electricity, and therefore, need the most help. Since many LMI communities also live in the least energy-efficient homes, the opportunity for energy savings is even greater. Consumers can potentially get up to $14,000 or more toward the partial or full cost of an efficiency project.
The IRA has allocated $8.8 billion for two initiatives: the Home Efficiency Rebates Program (previously HOMES), which offers up to $8,000, and the Home Electrification and Appliance Rebates Program (previously HEEHRA), which offers up to $14,000. Most of the funding will be distributed on a local level by state energy offices. Each state or territory will have the opportunity to apply or request funds to support the IRA’s key initiatives.
States and territories can apply to one or both of the IRA’s home energy rebate programs and will receive funding once the DOE approves their plans. Programs will be available until the funds are used entirely or September 30, 2031, whichever comes first.
Energy offices must submit a separate application for each program and will receive 25% of their allocated funds once their program application is approved. The U.S. Department of Energy (DOE) will be prioritizing Quick Start Programs this year to encourage states and territories to launch programs in 2023.
A Quick Start Program lets states and territories who plan to launch their home energy rebate program in 2023 apply for up to 25% of their funding allocation. These applications will be prioritized for approvals by the DOE and are intended for states and territories that plan to use existing programs in the area to rapidly launch the new IRA rebates.
The DOE’s guidance strongly encourages states to collaborate with utilities and their energy efficiency programs, but it does not specifically require it. Existing utility program infrastructure, such as branding and outreach, qualified contractor networks, and rebate delivery should be strongly considered when developing an application. This is especially important for states and territories who want to launch in 2023 with a quick start program.
State programs also now have guidance for how to work with utilities to access consumer energy use records that are required for creating accurate savings models.
State programs can choose between several verification options to confirm what level of rebates a household is eligible for based on income. Traditional income documentation, such as a Form 1040, is one option. Another option is for states to lean on recognized programs that people may already participate in like SNAP, Medicaid, and Weatherization Assistance Programs (WAP).
At the start of 2023, several home energy tax credits became available for consumers. This includes the Energy Efficiency Improvement Credit, often referred to as the 25C tax credit, that can save you 30% on qualifying upgrades. Many of these upgrades also qualify for home energy rebates funded by the IRA.
People who receive IRA rebates for improvements like heat pumps or insulation that are also eligible for the federal tax credit can still claim the credit after reducing the amount provided from the rebate. For examples of how to maximize your savings, read our blog on what the new guidance means for you.
Previously known as HOMES, the Home Efficiency Rebates Program lets states and territories provide rebates to households for whole-house energy-saving retrofits.
Eligibility for this program includes single-family homes, multifamily buildings, and income-qualified households. As part of the grant application, states can request approval for higher rebate amounts for LMI households. The program also includes a $200 bonus to contractors or providers for each home located in a disadvantaged community.
Previously known as the High-Efficiency Electric Home Rebate Act (HEEHRA), the Home Electrification and Appliance Rebates Program helps low- and moderate-income (LMI) households save on energy-efficient electric home upgrades.
Eligibility for these programs will be limited to LMI households with a total annual income less than 150% of the median for the area, as well as multifamily building owners with more than 50% LMI residents. If income verification is included at the point-of-sale, these programs would also allow for instant rebates to be applied upfront.
Rebates for energy efficiency improvements include:
|Energy Efficiency Measure
|Maximum Rebate Amount
|Heat Pump Water Heaters
|Heat Pump HVAC
|Electric Stove, Cooktop, Range, or Oven
|Heat Pump Clothes Dryer
|Electric Load Center Upgrade
|Insulation, Air Sealing, and Ventilation
The deadline for applications is January 31, 2025. States or territories must provide notice of their intent to apply by August 16, 2024, otherwise their allocation will be redistributed to other State Energy Offices that applied for funding. It’s important to keep in mind that the application process is complex, and it will likely be several weeks or months before many states and territories are ready to submit their program applications for DOE approval.
The IRA modifies and extends existing tax credits through 2032 for residential homeowners. Such a long window provides ample opportunity to take advantage of all the ways to save. For example, the Energy Efficiency Home Improvement Credit has increased to a 30% credit (up to $1,200 per year) that can be applied to projects such as rooftop solar, home energy audits, efficient water heaters and heat pump water heaters, central air conditioning and more.
There are also additional tax credits for both commercial and residential electric vehicles (EVs). A full breakdown of the tax credits included in the IRA can be found in this summary by the Bipartisan Policy Center.
It’s no secret that the future of transportation is being shaped by electric vehicles. The IRA will accelerate this transition through tax credits and grants. Here are some of the most notable ones:
There are several provisions focused on decarbonization or greenhouse gas (GHG) reduction.
With nearly $370 billion in funding for climate and energy initiatives there are a lot of exciting opportunities in the bill. A few other notable areas include:
We will continue to add to this FAQ as more details arise about these and other parts of the IRA.
The information provided was sourced directly from the Inflation Reduction Act bill or other supporting materials where noted.