Inflation Reduction Act
The Federal Inflation Reduction Act's (IRA) Investment in Clean Energy and Climate Action
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. The US Department of Energy (DOE) is currently designing the rebate programs that will be administered through the states. However, the federal tax credits mentioned below are effective beginning in the 2023 calendar year.
Lowering Energy Costs for Households Through Rebates
DEP’s Energy Programs Office will be administering two IRA-funded rebate programs for low to moderate income households. The Home Energy Performance-Based, Whole-House Rebates (HOMES) Program will allow states to incentivize whole-house energy savings retrofits for homeowners. The High-Efficiency Electric Home Rebate (HEEHRA) Program will consist of point-of-sale consumer discounts on the purchase of high-efficiency electric home appliances. To stay up to date, there are two websites where you can register to receive email updates about these programs as they develop:
the White House Clean Energy page and
the US DOE Home Energy Rebate Program page.
It is unknown when rebates will be available to PA homeowners due to the current unavailability of guidance, including a detailed implementation timeline from DOE. Right now, DOE is conducting stakeholder outreach and hosting listening sessions to gather input into the design of the programs. After receipt of guidance, preparing, and standing-up a program, PADEP anticipates we will be able to open the HOMES & HEEHRA rebates for PA residents by late 2023 or early 2024.
The rebate amounts and income eligibility limits are set by the IRA legislation. However, once more guidance is received, PADEP will design programs specific to the needs of our Pennsylvania residents.
Lowering Energy Costs for Households Through IRS Tax Credits
(All tax credits mentioned below are effective for the 2023 calendar year)
These programs will be managed through IRS tax credits. Please check with your tax advisor for further details:
New Energy Efficient Home Credit:
- Tax credit for homebuilders.
- $2,500 for new homes meeting Energy Star standards; $5,000 for certified zero-energy ready homes. For multifamily, base amounts are $500 per unit for Energy Star and $1000 per unit for zero-energy ready.
Residential Clean Energy Credit (including Solar):
- Provides a 30% tax credit for the purchase of residential clean energy equipment, including rooftop solar, wind, geothermal, and battery storage with capacity of at least 3 kWh.
Energy Efficient Home Improvement Credit:
- Provides a tax credit for energy-efficiency improvements of residential homes.
- Base Credit Amount: 30% of cost, with limits for each type of improvement and total per year. Credit capped at $600 for “energy property,” e.g. efficient heating and cooling equipment; $600 for windows; $250 per door, $500 total for doors; $2,000 for heat pumps. Total annual credit capped at $1,200, with a separate annual $2,000 limit for heat pumps. $150 credit for home energy audits.
Clean Vehicle Credit (Electric Vehicles):
- Provides a maximum $7500 tax credit for consumers purchasing new qualifying clean vehicles, including battery electric, plug-in hybrid, or fuel cell electric vehicles.
- Vehicle must meet certain standards for North American assembly; the battery’s components must meet certain standards for manufacturing or assembly; and the battery’s critical minerals must meet certain requirements for sourcing or processing in the United States or from trusted trade partners.
Previously-Owned Clean Vehicles Credit:
- Provides a maximum $4000 tax credit to support used vehicle buyers who choose to go electric.