Summer is here in the DMV, which means air conditioning is mandatory. Making the most of your AC and your home’s energy efficiency is key to keeping your power bill at bay. If you’re thinking about upgrading your weatherization or purchasing a more energy-efficient air conditioning system, now is a great time. The Inflation Reduction Act has brought about some big savings for homeowners looking to electrify their home and add efficiency upgrades.
If you have questions about why electrifying your home will save you money in the long run vs. natural gas, check out this recent article from the Sierra Club’s wonderful Ivy Main in the Virginia Mercury.
The savings break down into two basic categories: Federal tax credits and state-administered rebates. The tax credits are available now, and to anyone who has a tax liability — up to $1200 per year plus $2000 for a heat pump. The rebates, while clear in the basic outline of how much they are worth, are still in the design process of how they will be disseminated, so they won’t kick in until 2024.
Before we look at tax credits, let’s break down the rebates:
The IRA created two new residential rebate programs. The Home Energy Performance-Based, Whole-House Rebates (HOMES) Program will provide rebates for whole-house energy savings retrofits. The High-Efficiency Electric Home Rebate (HEEHRA) Program will provide point-of-sale consumer discounts on the purchase of high-efficiency electric home appliances.
According to the U.S. Department of Energy (US DOE) the HOMES & HEEHRA rebates are expected to be available in early 2024. The US DOE is currently conducting stakeholder outreach and offering listening sessions to gather input into the design of the programs. Virginia Energy is awaiting further guidance from US DOE on these rebate programs. You can find more information and sign up for email updates on these websites: the White House Clean Energy page and the US DOE Home Energy Rebate Program page.
HOMES Program: rebates available in 2024
State guidance for the HOMES rebates is still being decided, so these are probably not going to be available until 2024 at the soonest. The numbers in the law remain the same, but the state will decide how they will be implemented. The home energy performance-based, whole-house rebates will include:
- Rebates for energy efficiency retrofits range from $2,000-$4,000 for individual households and up to $400,000 for multifamily buildings.
- Grants to states to provide rebates for home retrofits.
- Up to $2,000 for retrofits reducing energy use by 20 percent or more, and up to $4,000 for retrofits saving 35% or more.
- Maximum rebates double for retrofits of low- and moderate-income homes.
HEEHRA Program: rebates available in 2024
The HEEHRA rebates are made available exclusively to low-to-moderate income households. These point- of-sale rebates are immediate, off- the-top discounts when making qualifying electrification purchases. They will also be administered by the states, and won’t be available until 2024, so there is still uncertainty about how people will claim them. The rebates will differ by state in the way they work, but the numbers dictated by the Inflation Reduction Act remain the same.
The actual amount you can get back depends on your eligibility. Homeowners who make up to 80% of the median income for their area will be eligible for the maximum rebate amount, and homeowners making up to 150% of their area median income will be eligible for 50% of the rebate amount.
How much can I get back in rebates?
The chart below shows the maximum amount a homeowner can get back after purchasing any of the products or upgrades:
Federal Tax Credits for Home Electrification: available now!
The federal tax credits began in January 2023, and anyone who has a tax liability is eligible. A credit will be available for up to $1200 per year for energy efficiency and weatherization projects plus $2000 for a new heat pump HVAC system. If you have more than $4000 in weatherization or energy efficiency projects you’ll want to space them out so you can get the max tax credit.
For example, you may decide to install an induction stove so that your family is no longer breathing indoor air pollution caused by your gas stove. But if you are also looking to electrify your dryer and seal or replace doors and windows, you’ll definitely end up with more than $4000 of improvements.
Any amount you spend over $4000 will exceed the $1200 limit for the tax credit in one year, not including the heat pump HVAC. So replacing the stove and dryer this year and waiting until the following year to do the weatherization would be wise. You can claim up to $1200 each year through 2032 so you can space your projects out and get it all done.
See the chart below for all of the eligible credits, and note that the $2000 HVAC credit is available on top of the $1200 max per year for the other improvements.
If you’d like to see the max amount you can qualify for, use this handy calculator from Rewiring America:
Want to learn more about the Inflation Reduction Act and the renewable energy & EV tax credits included? Check out these blog posts to continue your research:
Give us a call at 703-249-6594 or click below to get in touch. We’d love to talk through all the tax credits and celebrate the passage of the IRA with you!