Inflation Reduction Act:
The Inflation Reduction Act is the largest climate legislation in US history. Starting January 1, 2023, through December 31, 2032, tax credits and rebates are available to homeowners for energy efficiency upgrades, renewables, and electric vehicles. The IRA includes upfront incentives designed for income-qualified households, point-of-sale rebates, whole-home retrofits, and state-administered programs starting in 2024. Washington State updates can currently be found on the Federal Funding for Buildings webpage. Specific questions can be directed to email@example.com.
We’ll continue to update this webpage as we get more information and updates regarding State and local programs. In the meantime, on January 35, 2023, we hosted an educational session on the Inflation Reduction Act – Check out our YouTube channel to view the recording.
To get started with your energy-efficiency upgrade or remodel projects, visit our Green Pages Directory to find member professionals experienced in sustainable building projects.
Energy Efficiency Tax Credits for Your Home
- The new law includes a credit of as much as $2,000 to help homeowners purchase heat pumps.
- $840 rebate for people with qualifying household incomes to purchase an electric range. Induction ranges and traditional electric coil stoves would qualify. The rebates are available to people making up to 150 percent of the median income in their area.
- 30 percent tax credits — up to $1,200 annually — for energy-efficiency home improvements, specifying $600 for windows and $500 for doors.
- Up to $150 for a home energy audit that can assess your home’s energy use.
The IRA continues an existing $7,500 tax credit for electric and hybrid plug-in passenger vehicles but makes some significant changes.
- Vehicles have to be assembled in North America.
- Income ceiling of $150,000 for individuals and $300,000 for joint filers.
- Price limits for vehicles: Cars that cost more than $55,000 and trucks and SUVs costing more than $80,000 are not eligible.
- The credit is currently claimed on your federal tax return, but the law envisions that it could reduce vehicle prices at the point-of-sale beginning in 2024.
- There’s a new credit for sales of used electric vehicles.
- A new credit for charging equipment is being restored and extended.
The IRA extended the full 30 percent tax credit through the end of 2022, after which it drops to 26 percent in 2033 and 22 percent in 2034 and then phases out completely unless Congress extends it. Additional eligible expenditures include:
- Solar photovoltaic systems
- Battery storage > 3kWh
- Solar water heating
- Fuel cell
- Small wind energy
- Geothermal heat pumps
HOMES (Home Owner Managing Energy Savings)
Up to $8000 cash back is available depending on how much energy use you cut and your household income. Weatherization improvements like adding insulation or installing more efficient equipment or appliances would qualify. The projects eligible for the rebate are based on actual energy performance savings. The rebate includes costs associated with work performed and the equipment needed to install upgrades, such as insulation or HVAC installations. Visit Rewiring America to calculate how much you might save.
- Low- and moderate-income homeowners may claim up to $4,000 of the project cost for energy savings of at least 20 percent or
- Up to $8,000 for energy savings of at least 35 percent.
- Other homeowners may claim up to $2,000 per multifamily building with energy savings of at least 20 percent or
- Up to $4,000 per multifamily building with energy savings of at least 35 percent.
- The program extends rebates to multifamily buildings in which at least 50 percent of residents are low- or moderate-income.
HEEHRA (High-Efficiency Electric Home Rebate Act)
HEEHRA is a 10-year program that offers low- and medium-income families up to $14k per year in point-of-sale discounts for electrification projects. Low-income households that earn below 80% Area Median Income (AMI) will have 100% of their costs covered, including installation, while moderate-income households earning between 80-150% of AMI will have 50% of their costs covered, including installation.
- Up to $8k for a heat pump
- Up to $1,750 for a heat pump water heater
- Up to $840 for an electric cooktop or induction stove
- Up to $840 for a heat pump clothes dryer
- Up to $1600 for insulation, air sealing, and ventilation (a.k.a. weatherization)
- Up to $2,500 for electric wiring
- Up to $4,000 for breaker box
Builder Tax Credits: Single-family & Multifamily
The IRA amended Internal Revenue Code Section 45L to provide taxpayers with a tax credit for eligible new or substantially reconstructed homes that meet applicable ENERGY STAR home program or DOE Zero Energy Ready Home (ZERH) program requirements. The new 45L provisions include two tiers of credits, with the higher credits for eligible homes and dwelling units certified to applicable ZERH program requirements.
- The 45L credit is $5,000 for single family and manufactured homes eligible to participate in the EPA’s ENERGY STAR Residential New Construction Program or the ENERGY STAR Manufactured New Homes Program, respectively, and which are certified to applicable ZERH program requirements.
- The 45L credit is $1,000 for dwelling units that are part of a building eligible to participate in the ENERGY STAR Multifamily New Construction Program, and which are certified to applicable ZERH program requirements, unless the project meets prevailing wage requirements, in which case the 45L credit is $5,000 per dwelling unit.
- These new 45L rules apply to qualified energy efficient homes acquired after December 31, 2022, and before January 1, 2033, for use as a residence during the taxable year. DOE continues to coordinate with the Internal Revenue Service (IRS) regarding forthcoming IRS 45L guidance.
The information provided here does not constitute professional tax advice or other professional financial guidance. It should not be used as the only source of information when making decisions regarding design, purchasing, investments, or the tax implications of new home construction, or when executing other binding agreements. In the event that there is conflict between information provided on this webpage and guidance or notices published by IRS, the information published by IRS shall take precedence.