Consumer Rebates and Tax Credits created under the Inflation Reduction Act
In August of 2022, the Federal Inflation Reduction Act (IRA) was signed into law, authorizing tax credits and rebate programs designed to help households across the country save money and energy. Information about these resources is below. Please check with your tax advisor for further details about the tax provisions.
Credits for Making Your Home More Energy Efficient – up to $3,200 annually
This legislation significantly expands the 25C tax credit, now called the Energy Efficient Home Improvement Credit and extends it for 10 years.
Homeowners can receive a tax credit equal to 30 percent of the cost of all eligible energy efficient home improvements made during the year.
The annual amount homeowners can claim for heat pumps, heat pump water heaters or biomass stoves is capped at $2,000. Upgrade costs eligible for the credit can include equipment, installation and labor costs.
Homeowners can also claim up to $1,200 for other energy-efficient improvements including up to: $150 for a home energy audit, $250 for a new exterior door ($500 total for all exterior doors), $600 for new exterior windows and skylights, $1,200 for insulation and $600 for an upgraded electrical panel.
For more information, check out this IRS FAQ on the 25C credit, this ENERGY Star Guide on qualifying purchases, and Rewiring America’s Fact Sheet.
Credits for Rooftop Solar and Other Residential Green Energy – 30 percent tax credit
This 30 percent credit applies to purchase and installation costs for:
- Solar panels
- Solar water heaters
- Fuel cell property expenditures
- Small wind turbines
- Geothermal heat pumps
- Battery storage systems
Up-Front Discounts on Home Electrification Upgrades – up to $14,000
Program Start Date TBD
Electrifying homes can save families hundreds of dollars on their energy bills but can also have high up-front costs. The new law allocates $94 million to help low- and moderate-income households in Virginia reduce their energy bills through the High-Efficiency Electric Home Rebate (HEEHRA) program.
Administered by Virginia Energy, the program will provide point-of-sale rebates on the purchase of ENERGY STAR-certified electric appliances and other home electrification projects. It may take one to two years to get the program up and running, so it is not yet known when the rebates will be available to consumers.
Low-income households that make less than 80 percent of their Area Median Income (AMI) will be eligible for rebates that cover 100% of the purchase and installation costs for qualified electrification projects. Moderate-income households making between 80-150 percent AMI will be eligible for rebates covering 50 percent of the cost of home electrification projects.
The maximum allowable rebate amount for qualifying upgrades is $14,000 and includes:
- Heat pump HVAC for heating/cooling $8,000
- Heat pump water heater $1,750
- Electric stove, cooktop, range, or oven $840
- Heat pump clothes dryer $840
- Upgraded breaker box $4,000
- Upgraded electrical wiring $2,500
- Weatherization (insulation, ventilation) $1,600
Info for Renters: Renters may be able to use the rebates to purchase portable appliances like window-unit heat pumps and induction cooktops. Renters may also receive other indirect benefits if the owner of their rental unit makes use of the program. Rewiring America has a fact sheet summarizing the home electrification rebates here.
Discounts on Energy-Saving Home Improvements – up to $8,000 in savings
Program Start Date TBD
The new law will allocate $94.5 million to help Virginia households undertake comprehensive energy-efficient home improvement projects through the Home Owner Managing Energy Savings (HOMES) rebate program. The rebate is designed to reward homeowners for making energy-efficiency retrofits that achieve greater energy savings. For example, households that reduce energy usage by 20 percent can get a rebate of up to $2,000, while households that achieve a 35 percent reduction in energy usage can get up to $4,000.
Low-income households (making less than 80 percent AMI) are eligible for larger rebates—80 percent of the project cost up to $8,000. Administered by Virginia Energy, it is to be determined when the rebates will be available to Virginia consumers. Please note that homeowners can only receive a rebate from either the HEEHRA program or the HOMES program—not both. However, homeowners are eligible to combine both a rebate from either of these two rebate programs and receive an energy efficiency tax credit at the same time. Check out this resource from Rewiring America for more information
Help Purchasing a New Electric Vehicle – up to $7,500 in savings
The legislation makes it less expensive to purchase a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) by modifying the existing federal tax credit known as 30D and extending it for 10 years. Learn more about how you can get up to $7,500 for buying a new EV at this link. The law introduces new eligibility requirements for the credit based on buyer income, vehicle price, vehicle assembly location, battery manufacturing location, and battery component origin.
Qualifying buyers are limited to individuals with a modified adjusted gross income (MAGI) less than $150,000 (or $300,000 for joint filers). Qualifying vehicles must have a Manufacturer Suggested Retail Price (MSRP) of less than $55,000 (or $80,000 for vans, SUVs or pick-up trucks), and meet certain battery manufacturing and component criteria.
Note: The manufacturing and component criteria are effective on April 18, 2023. Vehicles delivered before that date are not subject to the updated criteria. Vehicles possessed on and after April 18, 2023 ARE subject to manufacturing and component criteria, even if the purchase was made before that date. To claim the credit, file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles) with your tax return.
Help Purchasing a Used Electric Vehicle – up to $4,000 in savings
To help make EVs more affordable to more Americans—and help them save money on gas long-term—the bill establishes a new tax credit for used EVs called the Previously-Owned Clean Vehicle Credit (25E). Qualifying buyers can use this credit to get a discount of 30 percent off the cost of a used EV—up to a maximum of $4,000. To qualify for this credit, buyers must have a MAGI of less than $75,000 (or $150,000 for joint filers). Qualifying vehicles must have a MSRP of less than $25,000, weigh less than 14,000 pounds, and be at least two years old (model year must be at least two years older than the year of sale.)
Purchases must be made through a dealer. To claim the credit, complete Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles and New Clean Vehicles), and file it with your tax return for the year you took possession of the vehicle.
Assistance in Installing a Home EV Charger – up to $1,000 in savings
Having reliable charging infrastructure is a barrier for many who want to switch to an electric vehicle. The new law incentivizes businesses and homeowners to install EV chargers by expanding the existing tax credit known as the Alternative Fuel Vehicle Refueling Property Credit (30C) and extending it for 10 years. Homeowners residing in eligible lower-income or rural census tracts can get a tax credit of 30 percent of the cost of installing a home EV charger on their property—up to a maximum of $1,000.
This credit could also help renters by encouraging apartment complexes and other businesses to install EV chargers for residents and customers. As the climate bill is so new, government agencies have not yet updated their websites to reflect improvements in these incentives. More information on how to claim the 30C tax credit will be available when the IRS updates its form 8911. An “early release” draft of this updated form – not yet official – has been issued by the IRS.
*This resource page was compiled to raise awareness of new clean energy and electrification incentives and is not intended to substitute for professional financial advice.