The Inflation Reduction Act of 2022 (IRA), signed into law on August 16, 2022, directs new federal spending toward reducing carbon emissions, lowering healthcare costs, funding the Internal Revenue Service, and improving taxpayer compliance. The combination of rebates and tax credits included in the IRA will help you to save money and energy while counteracting some of the harmful contributions that you might make to climate change. The residential tax credits, for instance, are estimated to save over 100 million households $37 billion a year on their energy bills (RMI, 2022). Below are several areas where you could begin saving money around your home or business.
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Income-qualified households (single people making less than $150,000 and married couples making less than $300,000) can now receive an EV tax credit up to $7,500 if:
- The vehicle is assembled in North America.
- 50% of the battery's components are manufactured or assembled in North America (increasing by 10% each year after 2023, to 100% in 2028).
- The vehicle's price complies: <$80,000 for SUVs, pickup trucks, and vans; <$55,000 for other vehicles.
In addition, income-qualified households can receive a tax credit of up to $4,000 for previously-owned electric vehicles. The vehicle must be at least 2 years old and cost <$25,000.
Households will now be able to capture a credit of up to $150 for a home energy audit. Depending upon your local utility, you may be able to access a few different energy assessments, including:
- BGE Energy Assessments
- Delmarva Power and Light Energy Assessments
- Pepco Energy Assessments
- Potomac Edison Quick Home Energy Checkup
- SMECO Home Energy Analysisutil
Income-eligible households can get these assessments for free.
Rebates will be available to low- and moderate-income households in late 2023 through the Homeowner and Occupant Monetary Encouragement and Stability (HOMES) rebate program. These rebates will be based on the estimated energy savings from retrofits and will be available for both single family and multi-family homes. Up to $14,000 in rebates for low- or moderate-income households will also be available for qualified electrification projects through the High Efficiency Electric Home Rebate Program, including:
|Electric Load Service Center upgrades||$4,000|
|Electric Stove, Cooktop, Range, and/or Oven||$840|
|Heat Pump Clothes Dryers||$840|
|Heat Pump Heating/Cooling||$8,000|
|Heat Pump Water Heaters||$1,750|
|Insulation and Air Sealing||$1,600|
Tax credit of up to 30% of the cost for purchase and installation of a heat pump, up to $2000. Additionally, there are tax credits available for electric panel upgrades, which folks might need as they add more electric equipment to their homes. In addition, there will be a new point-of-sale rebate for people earning up to 150% of area median income that will apply to heat pumps, heat pump water heaters, and heat pump clothes dryers. The rebate has a $14,000 cap.
The energy efficient home credit for new manufactured homes will be increased to $2,500 or $5,000 if the home meets Energy Star requirements.
The residential 30% tax credit for any project advanced in 2022 and will apply to projects through 2032. Projects with battery storage connected to and powered by solar also qualify. Standalone residential energy storage systems >3kW in capacity will also qualify for a 30% tax credit (they do not need to be connected to/powered by solar).
The 26% Commercial Solar Investment Tax Credit was also increased to 30% and extended through 2024; the 30% applies to solar projects placed in service during or after 2022. The base credit will also apply to projects <1 MW or that meet prevailing wage and apprenticeship requirements. If a project is >1 MW and does not meet those requirements, the base credit is 6%. There will also new credit adders that can be stacked for additional benefit:
- Up to 10% for projects that are located in "energy communities" (defined as brownfield sites, communities with high fossil fuel employment and high unemployment, and/or communities with closed coal mines or coal-fired power plants).
- Up to 10% for solar projects <5MW located in low-income communities; applications will be required.
- Up to 20% for solar projects < 5MW and built as part of an affordable housing project or to benefit low-income households; applications will be required.
- Up to 10% for using US-manufactured solar products and construction material.
- Energy storage facilities are also eligible.
This provision will become the "Clean Electricity Investment Credit" in 2025 and will be extended through 2032 or until emission targets are reached. Visit SEIA to review the Investment Tax Credit Extension (Section 1302), Production Tax Credit Addition (Section 1301), and Transition to New Technology Neutral Credit (Sections 13701 and 13702), as well as Department of Energy for more information on Federal Solar Tax Credits for Businesses.
You may be eligible for a tax credit of up to 30% of cost of an energy efficient project through 2032, including any improvements on your principal residence. The lifetime cap has also been increased from $500 to an annual cap of $1,200 (visit EnergyStar.gov for more information).
|Doors||$250/door, up to $500 total|
The annual cap for heat pumps and heat pump water heaters is up to $2,000.
REAP will now provide 40% grants for rural businesses, farms and agricultural producers. Businesses must be located in rural areas with populations of 50,000 residents or less. Agricultural producers may be in rural or non-rural areas, must have at least 50% of their gross income coming from agricultural operations.Eligible projects include renewable energy (e.g., solar, wind, biomass) and energy efficiency upgrades (e.g., high efficiency HVAC, insulation, refrigeration, switching from diesel to electric irrigation motors). Fiscal year 2023 application deadlines are October 31, 2022 and March 31, 2023 (visit USDA for more information).
These resources are based on preliminary information released by the federal government. Program information may change as more guidance is provided by federal and state governments. For specific information on federal funding, please visit the relevant U.S. Government websites and consult with tax professionals regarding tax incentives that apply to you.
- Internal Revenue Service: Inflation Reduction Act of 2022
- U.S. Department of Energy: Making Our Homes More Efficient: Clean Energy Tax Credits for Consumers
- White House: Inflation Reduction Act Guidebook
Explore other topics in this series:
- Inflation Reduction Act -
Save money and energy through the IRA