Last summer, the Inflation Reduction Act (IRA) marked the single largest investment in climate and energy in American history. The bill offers tax credits and rebates designed to significantly reduce the expenses associated with a wide range of sustainable home improvement projects, directly impacting American homeowners looking to enhance the energy efficiency of their homes. 

The Inflation Reduction Act is a complex piece of legislation, so we’ve pulled out the key incentives that will benefit your decision to make a variety of sustainable home upgrades.

30% Tax Credit for Residential Solar  

With the addition of a residential solar system, you can claim a 30% tax credit that will offset the total price of the solar panels and installation costs. For example, if you spend $18,000 to purchase and install a system, you will be eligible for a $5,400 federal tax credit. 

Fun fact: Before the Inflation Reduction Act passed, the residential solar tax credit stood at 26%, with plans to decrease to 22% by the close of 2022, and eventually be phased out entirely by 2024. However, the new legislation extends the 30% tax credit until 2032. It's worth noting that your state might have supplementary incentives that can further lower your solar installation costs. Consult your local solar sales professional for additional details!

30% Tax Credit for Home Batteries 

Solar Home Batteries are covered under the 30% federal solar tax credit! Learn more about the benefits of home batteries here.  

Up to $1,200 Tax Credit for Efficient and Electric Home Upgrades, with $2,000 for Heat Pumps  

The IRA increased the cap on tax credits for a variety of efficient home upgrades, including new heating and cooling systems, electrical panels, weatherization improvements, home energy audits, and more. Qualifying products are eligible for a 30% tax credit, up to $1,200 each year. That means you could claim the $1,200 incentive for a new HVAC system in 2023 and claim another $1,200 for upgrading your windows and doors in 2024. On top of the yearly $1,200 incentive, you could also qualify for a $2,000 tax credit for replacing your outdated air conditioner with a high-efficiency electric heat pump.

Make your home more efficient and seize these tax credits today!

Up to $1,000 Tax Credit for Home Electric Vehicle Charging  

Residential electric vehicle chargers are eligible for a tax credit covering 30% of the price, and up to $1,000 in hardware and installation costs. 

Bidirectional chargers that allow for two-way power flow and chargers for 2- and 3-wheeled electric vehicles may also qualify. To benefit from this particular tax credit, you must live in a census tract that’s non-urban (aka rural) or defined as a low-income community. 

Up to $14,000 in Rebates for Electric and Efficient Home Improvement Products

In addition to tax credits, the Inflation Reduction Act includes rebates that reduce upfront project costs. Rebates included in the High-Efficiency Electric Home Rebate Program (HEEHRA) are subject to income level. Heat pump water heaters, HVAC-specific replacement heat pumps, clothes dryers, and more are eligible products under this program. Keep in mind that these rebates won’t be available until late 2023 or early 2024 as individual states roll out this rebate program.*

Up to $4,000 in Rebates for Whole Home Upgrades  

Don't qualify for the HEEHRA program? The performance-based whole-house rebate program may be a good fit for you. The rebate amount is based on the level of energy savings achieved by your sustainable home upgrades—up to $4,000 for most customers. For eligible low- and moderate-income households, the rebate goes up to $8,000. 

Customers can benefit from either this whole home rebate program or the rebates for specific products referenced above, not both. Similar to HEEHRA, whole home rebates won’t be available until late 2023 or early 2024 as the state-level programs are finalized.** In the meantime, talk to a home energy performance specialist about how to take advantage of all incentives. 

Upgrade and save today! 

Rewiring America has created an IRA Savings Calculator where you can submit information about your household to find out how much you could save from IRA tax credits and rebates. The multitude of available tax credits and rebates make today a wonderful time for American homeowners to invest in sustainable home upgrades. From solar installations and home batteries to efficient HVAC systems and water-saving turf, making energy-saving upgrades will save you money on your monthly energy bills, increase your home’s value, and drive forward the sustainability revolution.

*As of July 2024 only New York State has made HEEHRA rebates available through a pilot program.

**As of July 2024 whole home rebates are not currently available, as states work to build individual programs.