Rebate and Tax credits

The Inflation Reduction Act will make it more affordable for families to purchase energy-efficient equipment when they need to, make repairs to their homes, and save money on their utility bills each month. Starting in 2023, income tax credit amounts will increase, and new rebates should become available for making improvements to your home that save energy and support a clean energy future.  Combined with utility rebates offered in many parts of the country, these incentives could significantly reduce the cost of an ENERGY STAR Home Upgrade for your home.

What Is A Tax Credit?

A tax credit allows a homeowner to deduct money from taxes owed to the government.

Who Can Use This Credit?

Annual Limits on Energy-Efficient Home Improvement Tax Credits

In addition to limits on the amount of credit you can claim for any particular equipment installation or home improvement, there are annual aggregate limits.  The overall total limit for an efficiency tax credit in one year is $3,200.  This breaks down to a total limit of $1,200 for any combination of home envelope improvements (windows/doors/skylights, insulation, electrical) plus furnaces, boilers, and central air conditioners.  Any combination of heat pumps, heat pump water heaters, and biomass stoves/boilers are subject to an annual total limit of $2,000. (Note: ENERGY STAR-certified geothermal heat pumps are eligible for a separate tax credit and not counted against these limits.)

Are There Limits On Income?

No income limits apply, but because of annual limits on the tax credit amounts, it may be prudent to spread the improvements over a few years.

Savings for Homeowners

New federal income tax credits are available through 2032 providing up to $3,200 annually to lower the cost of energy-efficient home upgrades by up to 30 percent. Improvements such as installing heat pumps, heat pump water heaters, insulation, doors, and windows, as well as electrical panel upgrades, home energy audits, and more, are covered by the tax credits and can help families save money on their monthly energy bills for years to come. In addition to the energy efficiency credits, homeowners can also take advantage of the modified and extended Residential Clean Energy credit, which provides a 30 percent income tax credit for clean energy equipment, such as rooftop solar, wind energy, geothermal heat pumps, and battery storage through 2032, stepping down to 22 percent for 2033 and 2034.

Savings for Home Builders

The Inflation Reduction Act of 2022 updates and extends the Section 45L Tax Credit for Energy Efficient New Homes. For homes and units acquired on or after January 1, 2023, the base-level tax credit for home builders has specifically tied to meeting ENERGY STAR program requirements for single-family, manufactured, and multifamily homes, and the tax credit has been extended through 2032.

Savings for Commercial Building Owners

The Inflation Reduction Act of 2022 extends and expands the energy-efficient commercial buildings deduction that was made permanent under Section 179D in 2021. Buildings that increase their energy efficiency by at least 25 percent will be able to claim this deduction, with bonuses for higher efficiency improvements. *Disclaimer: The tax credit information contained within this website is provided for informational purposes only. It is not intended to substitute for expert advice from a professional tax/financial planner or the Internal Revenue Service (IRS).