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November 21, 2022

How to Take Advantage of Tax Credits & Rebates with the Inflation Reduction Act (IRA)

It’s time to replace your home’s HVAC, water heater and electrical box. The best part? You can get money to cover all or part of the cost, including professional installation, if you qualify. 

Many United States Homeowners can get up to $14,000 to make energy efficient improvements to their homes. It might sound too good to be true, but it’s part of a historic legislation passed in August 2022 called the Inflation Reduction Act of 2022 . According to the White House, $14,000 is available in direct consumer rebates & tax incentives for families to buy heat pumps or other energy efficient home appliances, saving them at least $350+ per year. It also includes up-front discounts, generous rebates, tax incentives and low-cost financing available to homeowners who make energy efficient upgrades to their homes. IRA is projected to reduce total carbon emissions by around 40% by 2030, according to the White House. 

What Kinds of Rebates are Available through IRA? 

There are two separate rebate programs through IRA to help homeowners swap out old power-sucking appliances with new energy-efficient upgrades. 

High-Efficiency Electric Home Rebate Act (HEEHRA)

This rebate program is designed to help low- and middle-income homeowners save up to $14,000 on energy efficient upgrades. It covers up to 100% of electrification projects for low-income households and up to 50% for middle-income earners. HEEHRA covers the appliance, professional installation and labor costs. 
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This includes up to:

(Amount based on income category)

  • $8,000 for Heat Pump HVAC Systems (Heating and Cooling System)
  • $1,750 Heat Pump Water Heater
  • $2,500 for Electric Wiring
  • $4,000 to Upgrade Your Electric Load Service Center (Breaker Boxes)
  • $1,600 for Insulation, Air Sealing and Ventilation

HEEHRA rebates are available point-of-sale, which means consumer rebates are applied at the time of purchase. HEEHRA was designed to give low- and moderate-income households the opportunity to save money up front. It also helps these same families save even more money on future utility bills. 

HEEHRA is not available yet and will be distributed on a state-by-state basis.

Whole Home Energy Reduction Rebate Program (HOMES) Rebate Program

This rebate program will provide homeowners more than $4 billion collectively to make homes more energy-efficient. The HOMES rebate program will give homeowners who cut energy usage by at least 35% rebates of up to $8,000 for low- and middle- income households and up to $4,000 for high-income households. HOMES specifically gives incentives to modeled (pre-upgrade) or measured (post-upgrade) energy savings for homeowners.
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HOMES rebates can be maximized by pairing electrification and weatherization upgrades. This program isn’t up and running yet and it isn’t clear what parts will be retroactive. We do know the install has to be complete by September 30, 2031 to qualify. 

Rebates Available through Paschal

(Amount based on income category)

  • Heat pump HVAC $8,000
  • Heat pump water heater $1,750
  • Breaker box $4,000
  • Electric wiring $2,500
  • Weatherization insulation, air sealing, ventilation $1,600

Rebate Income Guide

Rebate amounts are based on area median income (AMI), which is calculated based on the midpoint of a region’s income distribution. Fannie Mae has a free online AMI tool to help calculate the AMI for your region.

Low-Income: 

  • <80% Area Median Income (AMI)
  • 100% Cost Covered, including professional installation

Moderate-Income

  • 80-150% Area Median Income (AMI)
  • 50% Cost Covered, including professional installation

When Do Rebates and Tax Credits Start?

As we mentioned, the IRA rebates and tax credits are not live just yet. It’s not clear when they will take effect. The HOMES rebates will be distributed at a state level, so the start date will be determined by where you live.

When Do IRA Rebates End? 

The Inflation Reduction Act states rebates will be available through September 30, 2031. 

Are IRA’s HEEHRA Rebates Retroactive? 

  • Even though the law passed in August 2022, it isn’t clear if IRA rebates will be retroactive. HEEHRA rebates are point-of-sale discounts, which means they are processed through the company you use to install your upgrades. 
  • Right now, experts say they believe retroactive rebates will be at the discretion of each state.

Can I Double Dip Rebates?

The answer is, it depends. HEEHRA can stack with federal energy efficiency and electrification tax credits, according to the IRA. 

HEEHRA cannot be stacked with HOMES for the same single upgrade. Meaning, you can use HEEHRA for some upgrades and other federal grants or rebates for other upgrades. For example, you might use HEEHRA to upgrade your HVAC system and a different part of IRA for your water heater upgrade. Bottom line, HOMES and HEEHRA cannot be combined for the same upgrade, but households who qualify for both can use them on separate upgrades. Clarity on stacking rebates and tax credits through IRA is expected to be released soon.

What’s the Difference Between an IRA Rebate or Tax Credit?

Rebates are up-front savings, which means they are given to the customer at the time of sale. It’s up to the home services company to file paperwork. 

Tax credits means money is given back to customers when they file their taxes. The IRA tax credits are an annual incentive, meaning homeowners can use every year up to $1,200 per year. Think of it this way, you can use the tax credit this year for a new heat pump heating and air system and next year you can upgrade your home with a new heat pump water heater.

How do I Get Started? 

 

While you are waiting for IRA to take effect you can start preparing now and prioritize your home improvements. Here are a few things to consider: 

  • Have an energy audit performed on your home. Some electric companies will do this for free, but there’s usually a wait. Many home services companies will perform the audit for a few hundred dollars, which is often applied to any upgrades made.
  • Call your local and trusted home services company to see what upgrades you want to make and when. Once IRA goes live, home service companies will become very busy and waiting could slow down your home improvement plan.
  • Prioritize your upgrades and plan them out to take advantage of the rebates and tax credits available to you.

Paschal Air, Plumbing & Electric has Professional People ready to help with your energy-efficient upgrades. Call to talk to a Paschal Comfort Specialist today at 479-202-8961 or schedule online.

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