Rebates and Tax Credits 2023

The Inflation Reduction Act of 2022: Incentives for Homeowners

With the passage of the Inflation Reduction Act of 2022, more Americans will have access to homes that are healthier, more comfortable, and more efficient. No matter their income level, American homeowners will benefit from the financial incentives provided by the Inflation Reduction Act as they work to reduce energy waste, electrify their homes, and protect the environment.

The climate and energy home upgrading incentives provided by the Inflation Reduction Act can be divided into three categories:

  • The 25C Home Improvement Energy Efficiency Tax Credit
  • Program for High Efficiency Electric Home Rebates (HEEHR)
  • The HOMES Rebate Initiative

Both the HEEHRs and the HOMES rebate programs are still works in progress. Later this year, we should have a better sense of how the programs should work. The rules for each program will be set by the Internal Revenue Service (IRS) and the Department of Energy (DOE). The DOE will allocate funds to your State Energy Office, which in turn is responsible for setting up the programs. For now, we do know that either the HEEHR or the HOMES program can be combined with the Home Improvement tax credit, so for now it makes sense to focus on the tax credit since the rules are already fixed.

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Which Rebates and Tax Credits You Qualify for

The 25C Energy Efficiency Home Improvement Tax Credit
This home improvement tax credit has increased to up to 30% under the new legislation and allows you to receive benefits each year. The value is capped annually at the following:

  • $2,000 for electric and gas heat pumps and heat pump water heaters and boilers
  • $1,200 for weatherization installs

Heating your home with natural gas or heating oil may be more expensive than doing it with electricity. Compared to conventional heating systems like furnaces or boilers, electric heat pump HVAC systems are three times as efficient.

The Bottom Line
The government will give you $3,200 back on a new electric heat pump HVAC system install in the form of tax credits. Later this year, you can apply to receive even more money back through either the HEEHR program (for low to middle income homeowners) or the HOMES program (based on the actual energy saving performance of your new equipment). In the meantime, you enjoy the benefits of your new comfort system including increased comfort, peace of mind knowing you are doing your part to reduce residential carbon emissions, and drastically reduced energy bills.


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