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Get Federal Tax Savings and Other Rebates for Energy Efficiency Home Upgrades

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.

Federal Income Tax Credits for Efficiency Upgrades

Tax credits covering 30% of the project costs will be available for qualifying improvements to your primary residence through 2032.  For an ENERGY STAR Home Upgrade, this would apply to the heat pump for heating and cooling, a heat pump water heater, attic insulation and sealing, new windows and upgrades to your electric panel.  Based on the requirements for these tax credits, there is a range of ENERGY STAR certified products, across all these categories, that are eligible.

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.  That said, it’s always wise to optimize your attic insulation before installing a new heat pump, so you don’t pay for more heating and cooling than you actually need.  Making these upgrades together in one year would allow you a tax credit of up to $1,200 for the insulation and up to $2,000 for the heat pump. Similarly, you could combine a heat pump installation with window/door replacements.  In that scenario, the $2,000 credit for the heat pump could be combined with tax credits up to $600 total for the windows/skylights plus $500 for two or more doors. If you replace your water heater the following year, you would be eligible for another 30% tax credit, up to $2,000 plus up to $600 if you need an electric panel upgrade to accommodate the new water heater.

Learn the latest on federal tax credits for energy efficiency.

Home Upgrade Rebates

The Inflation Reduction Act includes significant funding for states and tribes to offer rebates to households that install new electric appliances, including super-efficient heat pumps, water heaters, clothes dryers, stoves, and ovens and for households that make repairs and improvements that increase energy efficiency.  These rebate programs are expected to start becoming available in the Fall of 2023, after states and tribes have applied for the necessary grant funding and established the infrastructure to run them.

For efficient, electric upgrades, the rebates could add up to as much as $14,000 and can be combined with income tax credits.  With respect to the elements of an ENERGY STAR Home Upgrade, these rebates would be up to $1,750 for an ENERGY STAR certified heat pump water heater, $8,000 for an ENERGY STAR heat pump, and $1,600 for attic insulation/sealing, plus up to $6,500 for associated electric panel and wiring upgrades.  Other rebate amounts include up to $840 for an electric stove or oven or an ENERGY STAR certified heat pump dryer.  There is an income limit associated with these rebates of no more than 150% of the local median income.

The more general home improvement rebates, which are not income limited and can also be combined with tax credits, will offer up to $2,000 for upgrades that are assessed to reduce household energy use by 20% and $4,000 for those assessed to save 35 percent. For many homes, key elements of an ENERGY STAR Home Upgrade are expected to deliver qualifying savings.

Author: Ann Bailey, ENERGY STAR Certified Products