The Inflation Reduction Act of 2022 (IRA) is the largest ever climate investment by the Federal Government in American history, projected to reduce greenhouse gas (GHG) by 31% to 44% below the 2005 levels by 2030. The IRA will also bring energy bill relief to U.S. households by incentivizing the adoption of more efficient, all-electric appliances. Importantly, the IRA recognizes the key role of highly efficient, variable-capacity heat pumps in slashing domestic GHG emissions and lowering energy costs for Americans.
IRA Highlights:
HEEHRP
- Single-home heat pump cost offset is $8,000
- Single-home maximum cost offset is $14,000
HOMES
- Homes with energy reduction of 35% are eligible for maximum rebate of $4,000.
25C
- A 10-year extension and expansion of existing tax credit – now 30% up to $2,000 for qualifying heat pump
Inflation Reduction Act Explanations & Benefits:
High-Efficiency Electric Home Rebate Program (HEEHRP)
- Allocates $4.5 billion in grants to states and tribal governments for home energy improvement projects including point-of-sale heat pump rebates.
- 10-year program, administered through State Energy Offices, likely to start mid-2023.
- Parameters of state-administered programs may vary.
- Single-home maximum cost offset is $14,000
- Caps per qualified equipment type:
- $8,000 for a heat pump.
- $1,750 for a heat pump water heater.
- $1,600 for insulation, air sealing, and ventilation.
- $2,500 for electric wiring.
- $4,000 for an electric load center upgrade.
- $840 for a stove, cooktop, range, oven, or heat pump clothes dryer.
- Up to a $500 rebate is available for our contractors per heat pump installation.
- ENERGY STAR® will be the criteria to qualify heat pump systems.
- Designed to support low-to-moderate income (LMI) households.
- Example:
- Households making up to 80% of local median income are eligible to receive a 100% rebate of up to $8,000 on the cost of heat pump installation.
- Moderate-income households (making 80-150% of local median) are eligible for a 50% rebate up to the same limits.
- E.g., To claim up to the cap of $8,000, must spend $16,000 in heat pump installation.
- Households with incomes above 150% of local median are not eligible.
- Example:
- No stacking with other federal or state grants/rebates on same project. There are options for combining rebates. See possible scenarios below in the FAQ section.
HOMES Rebate Program
- Provides funding to DOE for state energy offices ($4.3 billion) to develop and implement a rebate program to homeowners and aggregators for whole-house energy saving retrofits.
- Based on modeled energy savings for single and multifamily.
- Rebate levels:
- Homes with energy reduction of 20% are eligible for maximum rebate of $2,000, or half the cost of the retrofit project (whichever is less).
- Homes with energy reduction of 35% are eligible for maximum rebate of $4,000.
- Homes with energy reduction of 35% and qualify as lower income (<80% of local median income) are eligible for maximum rebate of $8,000.
Energy Efficient Home Improvement (25C) Tax Credit
- A 10-year extension and expansion of existing 10% tax credit to 30%.
- Begins with tax year 2023 (January 1, 2023), claim credit on your 2023 taxes.
- Up to $600 per item: breaker panel, insulation, fossil fuel systems (meeting elevated efficiency limits) with maximum of $1,200 tax credit.
- However, tax credit increases up to $2,000 max when adding a qualified heat pump installation to the project.*
- The heat pump system must meet or exceed the highest performance tier set by the Consortium for Energy Efficiency (CEE).**
- Households may claim annually through 2032.
- You can receive a tax credit and a rebate for the same project.
*Interpretation of this provision varies across media channels. We’re actively pursuing a universally accepted interpretation.
**Efforts are underway to simplify the efficiency performance qualifications. Check back soon for updates.