The Inflation Reduction Act (IRA) that was enacted on August 16, 2022 provides several incentives for homeowners, building owners, and contractors for installing or upgrading heating and cooling systems to higher energy efficient systems in an effort to reduce greenhouse gas emissions.

In addition to a previously enacted nonbusiness energy property tax credit, there are three major components of the new law that taxpayers may take advantage of. The new benefits will not be available until January 1, 2023 and the US Department of Energy still needs to sort out how the application process will work and how funds will be distributed to each State office. Combining these rebate programs is not allowed and there are several limitations for each to be aware of. Below is a brief description of each:

1. “High-Efficiency Electric Home Rebate Program” provides cash rebates for new equipment installations and upgrades with household income level limitations.
2. “Home Owner Managing Energy Savings (HOMES) Rebate Program” provides greater incentives for whole-house projects with household income level limitations.
3. “Energy Efficient Home Improvement Tax Credit (Section 25C)” provides tax credits for installed equipment that exceeds CEE’s highest tier (not the advanced tier) and has no income level limitations.
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      1. Additionally there is a Home Energy Audit tax credit for up to $150 for a taxpayer’s principal residence
4. “Nonbusiness energy property” tax credit, a previous law under Section 25C, is extended to December 31, 2032 for property placed in service after December 31, 2021.