Inflation Reduction Act and Building Electrification

Point of sale rebates up to $14,000 for low and moderate households (<80% Area Median Income) that install new, qualified electrification projects.

• $8,000 for heat pumps
• $1,750 for heat pump water heaters
• $840 for heat pump clothes dryers
• $840 for electric or induction stoves
• $4,000 for electrical panel upgrades
• $2,500 for rewiring
• $1,600 for basic weatherization

Project costs are 100% covered for household <80% AMI and 50% for households 80-150% AMI; multifamily buildings qualify if ≥50% of occupants are low and moderate income

Contractors can receive up to a $500 incentive

Direct rebates for energy efficiency retrofits

Up to $2000 for at least 20% modeled or 15% measured savings, $4000 for 35% and more modeled savings

• Capped at 50% of project costs for market rate (over 80% AMI)
• For low and moderate income households, up to $4000 for 20% savings, $8000 for 35% savings (capped at 80% of project costs)

Prohibits combining with other federal grants and rebates but can be used with state rebates or energy efficiency tax credits like 25C

Both single family and multifamily buildings are eligible; multifamily max of $200,000 for at least 20% modeled savings, $400,000 for at least 35% modeled savings

Provides 30% tax credit for residential efficiency and electrification upgrades, up to $3,200 per year. Covers both purchase and installation. Qualified electric appliances must meet the Consortium for Energy Efficiency's highest tier.

Annual credit for heat pump water and space heating/cooling capped at $2,000

Total annual credit for other upgrades capped at $1,200

• $600 for electric panel
• $1,200 for weatherization
• $150 for energy audit
• $600 for electric appliances other than heat pumps

Annual credit resets every year but is nonrefundable and does not carry over.

Reduces the cost of installing solar panels and other clean energy technologies by allowing homeowners to deduct up to 30% of the cost from their personal income tax liability

Applies to battery storage for the first time for residential systems >3 kWh

Credit will now provide a 30% tax credit for systems installed by the end of 2032, a 26% credit for those installed in 2033, and a 22% credit for those installed in 2034 before it expires

Section 48 is the commercial corollary where the business that installs, develops, and/or finances the clean energy project claims the credit

Applies to both new construction AND major renovations for dwelling units acquired after December 31, 2022. Can be stacked with the Low Income Housing Tax Credit Without Reducing Basis. Amount of credit depends on the level of home energy performance and use of prevailing wages, detailed below:

Grants and loans to owners and sponsors of privately-owned, HUD-subsidized properties that agree to an extended period of affordability for climate-friendly building upgrades.

Eligible Uses:

• Low-emission technologies, materials, or processes, including zero-emission electricity generation, energy storage or building electrification
• Improve energy or water efficiency, indoor air quality or sustainability
• Climate resilience
• Energy and water benchmarking

The tax deduction amount is calculated per square foot of the building and depends on the site energy use intensity (EUI) and use of prevailing wage in the workforce. Details provided in the table below.

For tax exempt entities, the IRA allows the tax deduction to be allocated to the person responsible for designing the property in lieu of property owner—these parties can include engineers, architects, contractors, energy services providers and environmental consultants.

In a Section 179D study, a qualified third party—separate from the designer taking the Section 179D deduction—uses IRS-approved energy software to model the energy performance of the building and improvements. The qualified third party must be a professional engineer (PE) licensed in the state where the building is located. The third party must review the results of the energy model and verify that the improvements meet the applicable energy-savings thresholds using the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) standards. The qualified third-party must also sign a certification document for the Section 179D deduction stating they have examined the energy model and support the allocation of the deduction to its respective designer. This certification document must then be signed by the designer and the building owner, allocating the deduction to the qualified taxpayer.