The Inflation Reduction Act (IRA)

• Begins with tax year 2023 (January 1, 2023), claim credit in 2024 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.
• Additionally, a separate cap of 30% up to $2,000 is applicable for the category of heat pumps and heat pump water heater installations. 
  • The heat pump system must meet or exceed the highest performance tier set by the Consortium for Energy Efficiency (CEE).*
• Resets every year, so households may claim on any installations completed during the tax year for any, and each, year through 2023.
• Households must have adequate tax liability to offset.
• You may qualify to receive a tax credit and a rebate for the same project.

*Efforts are underway to simplify the efficiency performance qualifications. Check back soon for updates.

• Likely to begin in 2024.
• 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.
  • Parameters of state-administered programs may vary.
• Designed to support low-to-moderate income (LMI) households.
  • Example:
    • Households making up to 80% of area 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 area 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 dollar-for-dollar.
    • Households with incomes above 150% of area median are not eligible.
• 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 may be available for contractors per heat pump installation - details pending.
• ENERGY STAR® will be the criteria to qualify heat pump systems.
• HEEHRP and HOMES grant funds cannot be used to double pay for the same measure within any home.

• Likely to begin late fall 2023
• 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 (measured in kWh, or kWh-equivalent) for single and multifamily.
• Potential 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 area median income) are eligible for maximum rebate of $8,000.

• Eligibility: Contractors that build and sell homes that meet specified energy efficiency requirements
  • Single Family Homes: $2,500 for homes that meet ENERGY STAR standards; $5,000 for zero energy ready homes.
  • Multifamily Dwellings: $500 per unit that meets ENERGY STAR standards; $1,000 per unit for zero energy ready units.
  • Multifamily Dwellings: $2,500 per unit that meets ENERGY STAR standards; $5,000 per unit for Zero Energy Ready units (condition: laborers and mechanics employ contractors and subcontractors that pay prevailing wages.)

• Beginning January 1, 2023, the deduction will be increased.
• Energy reduction (ER) will be lowered from 50% to 25% compared to the most recent ASHRAE Standard 90.1, determination no later than four years prior to the placed-in-service date.
• Tax deduction levels:
  • $.50 per square foot, plus $.02 for each percentage point above 25% ER, not to exceed $1.00 per square foot.
  • “Prevailing wage” provision: taxpayers can claim the bonus deduction for $2.50 per square foot, plus $.10 per square foot for each percentage point above 25% ER, not to exceed $5.00 per square foot if the prevailing wage requirement is met (any laborers, workers, contractors, and subcontractors who worked on the project were paid wages not less than base wages determined by local labor authorities).
  • The Act introduces new qualified retrofit plan qualifications and removes partial benefit allowances.
  • 179D’s expansion will allow 179D deductions to be allocated to any non-profits, tribal properties, and real-estate investment trusts (REITs), and it includes the existing provision for publicly funded projects.