Could you get home energy and EV incentives under the climate law?

Find out which tax credits and upfront discounts you can earn for heat pumps, solar, electric vehicles and more — and how much money they could save you.

a man in safety gear and a neon vest smiles while installing a heat pump
(Marcela Gara, Resource Media via CC BY-NC 2.0)
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The new climate law is chock-full of incentives to electrify your home and car, but the specifics are a maze to navigate. To help you find your way through, pro-electrification nonprofit Rewiring America has released an online calculator that tells you which of the incentives you’ll likely qualify for. And over 200,000 people have already tried it. 

I’m so excited that we put this out because it does seem like it’s being legitimately useful to people trying to figure out what the [law] means for them,“ said Sam Calisch, head of special projects at Rewiring America.

Consumer choice is a big deal for the climate. According to Calisch, more than 40% of U.S. energy emissions stem directly or indirectly from the decisions households make at their kitchen tables” — things like where they get their electricity from, what they use to heat and cool their homes, and what they drive.” 

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The calculator can inform those decisions, pointing Americans to the home and vehicle electrification discounts, rebates and tax credits that are, or will soon be, available to them thanks to the Inflation Reduction Act. 

Still, when Canary staff tried the calculator, some furrowed their brows; the results that it delivers can be a little confusing. So think of this article as your unofficial guide to how it works and what you can do with your results. 

Getting to know you

To determine which incentives you qualify for, the calculator asks you for several pieces of information: your ZIP code, homeowner status, household gross income, household size and whether you file taxes as an individual, jointly or as head of household. 

It uses different pieces of that information to determine your eligibility for different incentives. For example, your household income will qualify you for some incentives if it’s less than a certain absolute amount, and for others if it’s below a certain percentage threshold of the median income in your area. The calculator looks that up based on your ZIP code and household size using data from the U.S. Department of Housing and Urban Development. (According to the department, the national median household income in 2021 was $79,900.)

Your homeowner status comes into play because some incentives require you to be a homeowner — or really only make financial sense for property owners. Renters probably don’t want to foot the bill for an updated electric panel or geothermal heating system, for instance, so the calculator dismisses incentives for these types of items.

Before diving in, remember to take the results of the calculator with a grain of salt. It’s gathering just a few pieces of information about your particular income and tax situation, so it can only provide you with a broad-brush picture of your eligibility for incentives and how much they could save you. The incentive programs also have yet to be actually set up by the government agencies that will implement them. But the calculator results are still a great place to start. 

Calculating the savings — from low-income to high-income, from homeowners to renters

Ready to see the calculator in action? Imagine a married couple with two children are contemplating some serious climate-friendly home upgrades: solar on their roof, an electric car in their garage and new electric appliances to replace their aging fossil fuel-powered versions. They live in the Minneapolis ZIP code 55412. Let’s run through a few scenarios varying their household income and whether they own or rent their home. 

Lower-income homeowner: All incentives available! 

First, we’ll give the family a household income of $63,900. They’re considered a low-income household, as are other four-person households in their ZIP code earning up to $89,400, or 80 percent of the area median income. The couple owns their home. Feeding their details into the calculator, we find the family qualifies for all of the incentives the calculator assesses.

A table showing the IRA incentives available to a hypothetical low-income family in Minneapolis who owns their home

The calculator shows that if the family were to take advantage of these incentives, which are available for the next 10 years, they could save $14,000 through upfront discounts. Based on the calculator’s estimate of their tax liability, they could save another $4,149 via credits toward their tax bill. The calculator also provides a projected dollar amount that households could save annually on their energy bills based on types of homes, fuel, etc., in their state: $1,150 in this case.

Moderate-income homeowner: All incentives available except one

What about moderate-income households, making between 80 and 150 percent of area median income? Giving our Minneapolis family an income of $167,500 would put them in that range. They would qualify for every incentive but one: the used electric vehicle tax credit. That’s capped at a household income of $150,000 for joint tax filers.

A table showing the IRA incentives available to a hypothetical moderate-income family in Minneapolis who owns their home

This family would also be more limited in how it could use upfront discounts. For example, low-income households can apply an $8,000 discount to the full cost of buying and installing a heat-pump air conditioner/​heater, while a moderate-income household can use the discount only to cover up to half of those costs.

Calisch called the upfront discounts game-changing” for low- and moderate-income households. They’ll help families access the long-term benefits of electrification: healthier indoor air quality and lower, more stable bills, he noted. That stability is really critical for these households with high energy burdens” that suffer from spikes in oil and gas prices, such as those caused by Russia’s invasion of Ukraine, he said. Electricity prices have much, much lower volatility, which is hugely helpful for these households.”

Higher-income homeowner: Plenty of tax credits, no upfront incentives

High-income households making more than 150 percent of area median income don’t qualify for as many incentives. Say our Minneapolis family makes $200,000. They don’t get any upfront discounts, but they could take advantage of the clean energy and efficiency tax credits, as well as the home energy reduction rebate program, which rewards homeowners for retrofits that substantially reduce their energy consumption.

A table showing the IRA incentives available to a hypothetical high-income family in Minneapolis who owns their home

Low-income renter: A few incentives

If our Minneapolis family of four qualifies as low-income and rents instead of owning their home, they have even fewer incentives available to them: just five of the 17 in Rewiring America’s calculator.

A table showing the IRA incentives available to a hypothetical low-income family in Minneapolis who rents their home

Renters get the short end of the stick,” said Calisch, himself a renter. But there are some really interesting provisions that help us.” 

Low- and moderate-income renters can access the upfront discounts for appliances they can take with them: a portable window-unit heat pump, an electric stove and a heat-pump clothes dryer. And they could use the tax credits for electric vehicles. 

High-income renter: Just a tax credit for a new EV

High-income renters who earn above 150 percent of the area median income should take note: The lone incentive the calculator may show them is the tax credit for new EVs, which has an income cap of $300,000 for married couples filing jointly.

A table showing the IRA incentives available to a hypothetical high-income family in Minneapolis who rents their home

Diving deeper on the incentives

The calculator also provides more details when you hover your cursor over each incentive. We’ve pulled those details into a table. Here’s a screenshot:

screenshot of table showing all of the electrification and efficiency incentives available under the Inflation Reduction Act

The incentives fall roughly into five buckets, which we’ve given different colors in the table.

1. Solar, geothermal heating and battery tax credits

  • Program: Residential Clean Energy Credit (tax code section 25D)
  • What’s covered: Rooftop solar, geothermal heating and battery storage installations
  • How much: 30% tax credit
  • Who’s eligible: Homeowners (no income cap)

2. Electric vehicle tax credits

  • Programs: Clean Vehicle Credit (30D) and Credit for Previously Owned Clean Vehicles (25E)
  • What’s covered: New EVs and used EVs
  • How much: $7,500 for a new EV with a maximum manufacturer’s suggested retail price (MSRP) of $55,000, or for a van, SUV or pickup truck with a maximum MSRP of $80,000. $4,000 for a used EV with a maximum MSRP of $25,000.
  • Who’s eligible: For a new EV, households with a modified adjusted gross income of up to $150,000 for single tax filers and up to $300,000 for married couples filing jointly. For a used EV, households with a modified adjusted gross income of up to $75,000 for single tax filers and up to $150,000 for joint filers. 
  • Caveat: The Inflation Reduction Act requires eligible new EVs to be assembled in North America and, starting in 2024, to have batteries that were not made by an entity of foreign concern,” including China. Starting in 2025, the credit will also exclude batteries made with minerals extracted, processed or recycled by these countries of concern. The restrictions could make it hard for many automakers’ EVs to qualify for this tax credit until the U.S. and its allies have developed more battery-production capacity, which could take years. 

3. Home energy-efficiency tax credits

  • Program: Energy Efficient Home Improvement Credit (25C)
  • How much: 30% tax credits, up to specific amounts
  • What’s covered: Heat-pump air conditioner/​heaters (up to a $2,000 credit), heat-pump water heaters (up to a $2,000 credit), electric panel upgrades (up to a $600 credit), and weatherization measures, including air sealing and insulation (up to a $1,200 credit). An annual cap ($1,200 except for heat-pump appliances, in which case it’s $2,000) means that a household may want to space out projects over a few years to maximize the tax credits they can claim.
  • Who’s eligible: Anyone (no income cap)

4. Home energy-efficiency discounts

  • Program: High-Efficiency Electric Home Rebate Act. HEEHRA is legislation that was folded into the Inflation Reduction Act. 
  • Incentive: Upfront discounts on home electrification and efficiency installations
  • Who qualifies: Low- and moderate-income households, with different benefits
  • Details: HEEHRA discounts cover: heat-pump water heaters (up to $1,750), heat pumps (up to $8,000), electric stoves (up to $840), heat-pump clothes dryers (up to $840), weatherization improvements (up to $1,600), electric panels (up to $4,000) and electric wiring (up to $2,500). While the total available discounts sum to $19,520, a household can take only up to $14,000 in discounts. The program serves both low-income households defined as earning up to 80% of area median income, which can get the full value of each discount, and moderate-income households earning 80% to 150% of area median income, which can get half of the value of each discount. The program offers discounts on many of the installations that also earn tax credits in the Energy Efficient Home Improvement (25C) program mentioned in No. 3 above; according to Rewiring America, eligible consumers would be able to get both.

5. Rebates for home energy-efficiency retrofits 

  • Program: Hope for Homes. Hope for Homes legislation was folded into the Inflation Reduction Act. 
  • Incentive: A performance-based rebate for home energy-efficiency retrofits
  • Who qualifies: Homeowners, with greater benefits for low- and moderate-income households than for higher-income households
  • Details: Low- and moderate-income households that do home retrofits that are expected to lower household electricity consumption by at least 15% can receive a rebate of $4,000 or up to 50% of the project cost, and retrofits that achieve a 35% electricity reduction would be eligible for $8,000 or up to 80% of the project cost. For higher-income households, those rebates are halved. Households will probably need to do a home energy assessment in order to qualify for this incentive, according to Rewiring America. 

When and how will the incentives become available? 

The first two incentives listed in the calculator — for solar panels and geothermal heat pumps — are available immediately, so homeowners who install those systems this year can claim the tax credits when they file their 2022 taxes next year. Other tax credits will kick into place for the 2023 tax year.

Rewiring America is particularly enthusiastic about upfront discounts or rebates available through the HEEHRA program, which will be easier to access because they’re not tied to people’s tax returns. The group helped design HEEHRA with the aim of making it more simple and affordable for families to electrify their homes. But those discounts aren’t available just yet. The U.S. Department of Energy will be issuing guidance for state energy offices on how to implement the HEEHRA program. Rewiring America is currently making recommendations to DOE on this. And then the state offices will each set up their own systems to make the incentives available.

Still, Calisch was game to speculate on how consumers might reap HEEHRA’s benefits. For example, a household might first verify through a federal program that they meet the income requirements to receive discounts. Then, if the family’s gas-powered water heater were to break, they might shop at Home Depot for a $2,000 heat-pump water heater to replace it — and get $1,750 off at the register. With the [discounts], in most cases, these electric machines then become the cheapest option,” Calisch said.

Or if a family has a project to upgrade their home’s electrical wiring and is working with a contractor who’s approved to receive HEEHRA funds from the state energy office, the household could get the discount through the contractor. 

The idea behind the HEEHRA discounts is that customers don’t have to pay first and then figure out how to redeem the rebates later. That will be a big improvement over many existing energy-efficiency rebate programs, like the one Calisch recently contended with. He installed heat pumps at his parents’ house, and to get their rebate from the utility, we had to fill out a labyrinth of forms.” 

What’s next?

Rewiring America is continuing to refine its calculator. But that’s just the start of what the organization has planned, according to Calisch. Our vision is this [calculator] is going to have evolved into actually helping people plan this work.” Down the line, a more powerful and detailed tool could help families anticipate when to replace appliances and maximize the available incentives. One way would be by spreading out the home energy-efficiency tax credits (No. 3 above), so they can claim the maximum amount each year. A consumer might want to invest in weatherizing their home one year, update their electrical panel and wiring the next year, and install a heat pump to replace their aging AC system the year after that. All of these kinds of personal decisions we want to help people with,” Calisch said.

If you haven’t tried Rewiring America’s calculator yet, give it a whirl. See what the new climate law could do for you.

Alison F. Takemura is staff writer at Canary Media.