Heat Pump and The Inflation Reduction Act of 2022

The Inflation Reduction Act of 2022 (IRA) is the largest ever climate investment by the Federal Government in American history, projected to reduce greenhouse gas (GHG) by 31% to 44% below the 2005 levels by 2030. The IRA will also bring energy bill relief to U.S. households by incentivizing the adoption of more efficient, all-electric appliances. Notably, the IRA recognizes the critical role of highly efficient, variable-capacity heat pumps in slashing domestic GHG emissions and lowering energy costs for Americans.

Among many other objectives, the 2022 Inflation Reduction Act passed by President Joe Biden aims to lower costs for American homeowners. This includes help investing in energy solutions and related home improvements for qualified taxpayers.

1. The High-Efficiency Electric Home Rebate Program (HEEHRP) includes rebates to qualifying low and moderate-income households for installing heat pumps.
2. The Energy Efficient Home Improvement Tax Credit (25C) provides a federal tax credit to homeowners who install high-efficiency equipment. 
3. The Whole Home Energy Reduction Rebate Program (also known as “HOPE for HOMES” or “HOMES”) is a rebate program that rewards modeled (pre-upgrade) or measured (post-upgrade) energy savings. 

High-Efficiency Electric Home Rebate Program (HEEHRP)

As part of the 2022 Inflation Reduction Act, $4.5 billion was appropriated by the U.S. Government to fund the HEEHRP. These funds will be distributed to state energy offices, which will continue to offer the rebate program so long as funds are available. Unfortunately, there are only so many rebates that can be distributed. Still, you can be eligible for the program if your household income falls within these limits:

• Households Below 80% of the Local Median Income: The rebate may cover 100% of the system purchase price.
• Households Within 80% to 150% of the Local Median Income: 50% of the system purchase price can qualify for the rebate.
• Households Above 150% of the Local Median Income: Will not be eligible for the HEEHRP rebate.

Households that qualify for the HEEHRP can receive an HVAC rebate of up to $14,000. This includes up to $8,000 for installing an Energy Star-rated heat pump, up to $4,000 for upgrading an electrical panel, and up to $2,500 to improve home electrical wiring. In addition, up to $1,600 can be received for insulating and sealing a qualifying home.

Single-home maximum cost offset is $14,000

• Caps per qualified equipment type:
  • $8,000 for a heat pump.
  • $1,750 for a heat pump water heater.
  • $1,600 for insulation, air sealing, and ventilation.
  • $2,500 for electric wiring.
  • $4,000 for an electric load center upgrade.
  • $840 for a stove, cooktop, range, oven, or heat pump clothes dryer.
• ENERGY STAR® will be the criteria to qualify heat pump systems.
• Designed to support low-to-moderate income (LMI) households.
• Example: Households making up to 80% of the local median income are eligible to receive a 100% rebate of up to $8,000 on the heat pump installation cost.
• Moderate-income households (making 80-150% of the local median) are eligible for a 50% rebate up to the same limits.  E.g., To claim up to the cap of $8,000, you must spend $16,000 on heat pump installation. Households with incomes above 150% of the local median are not eligible.
• No stacking with other federal or state grants/rebates on the same project. There are options for combining rebates. See possible scenarios below in the FAQ section.

How Does the HEEHRP Rebate Work?

Since the HEEHRP rebate likely will be active in 2023, it’s hard to say precisely how it will work. The rebate is point-of-sale, meaning you’ll likely receive a discount upon purchasing qualifying electrification products. Still, you might also need to take additional measures by the time the program comes into effect.

Who qualifies for HEEHRP? HEEHRP discounts are reserved for low- and moderate-income households. Households can use Rewiring America’s IRA Savings Calculator to determine their eligibility. When exactly will HEEHRP be available? HEEHRP discounts may start to become known by the second half of 2023. Still, the exact timeline depends on DOE guidance and state implementation plans.

Does HEEHRP have efficiency requirements? Yes. HEEHRP rebates apply only to ENERGY STAR-certified appliances (where such categories exist), including heat pumps, heat pump water heaters, heat pump clothes dryers, and weatherization products. 

Can HEEHRP be stacked with other federal grants? Yes, but not for the same single upgrade. However, households pursuing a multi-upgrade retrofit can use HEEHRP for some upgrades and other federal grants or rebates for additional upgrades. HEEHRP should also be implemented with the ability to braid into WAP and LIHEAP.

Can HEEHRP be stacked with state programs? HEEHRP can stack with state programs per state discretion, so households and contractors should consult with their State Energy Offices.

HOMES Rebate Program

The Whole Home Energy Reduction Rebate Program (also known as “HOPE for HOMES” or “HOMES”) is a rebate program that rewards modeled (pre-upgrade) or measured (post-upgrade) energy savings. HOMES rebates can be maximized by pairing electrification and weatherization upgrades. HEEHR and HOMES cannot be combined for the same single upgrade. Still, they can be stacked for different upgrades within the same household, should that household meet both programs’ eligibility requirements. While low-income households will receive more significant and accessible up-front discounts from HEEHR, non-LMI households are prime candidates for HOMES rebates.

• Provides funding to DOE for state energy offices ($4.3 billion) to develop and implement a rebate program to homeowners and aggregators for whole-house energy-saving retrofits.
• Based on modeled energy savings for single and multifamily.
• Rebate levels:
  • Homes with an energy reduction of 20% are eligible for a maximum rebate of $2,000, or half the retrofit project cost (whichever is less).
  • Homes with an energy reduction of 35% are eligible for a maximum rebate of $4,000.
  • Homes with an energy reduction of 35% and qualify as lower income (<80% of local median income) are eligible for a maximum rebate of $8,000.

Energy Efficient Home Improvement Tax Credit (25C) Program

The 25C program has been renewed. Previously scheduled to expire at the end of 2021, it has been extended until 2032. Households that install CEE Top Tier high-efficiency equipment are eligible for the tax credit, which is now retroactive to January 1, 2022. There’s now an annual cap of $1,200, excluding heat pumps, but households can receive up to:

• A 10-year extension and expansion of the existing 10% tax credit to 30%.
• Begins with the tax year 2023 (January 1, 2023), and claim the credit on your 2023 taxes.
• Up to $600 per item: breaker panel, insulation, fossil fuel systems (meeting elevated efficiency limits) with a maximum of $1,200 tax credit.
• However, the tax credit increases to $2,000 max when adding a qualified heat pump installation to the project.*
  • The heat pump system must meet or exceed the highest performance tier set by the Consortium for Energy Efficiency (CEE).**
• Households may claim annually through 2032.
• You can receive a tax credit and a rebate for the same project.

While the 25C tax credit cannot be combined with other federal programs, it does not have income requirements. In addition, it can cover 30% of the total cost of installing your HVAC system (including labor) if eligibility requirements are met.

*Interpretation of this provision varies across media channels. We’re actively pursuing a universally accepted interpretation.

**Efforts are underway to simplify the efficiency performance qualifications. Check back soon for updates.

Can HEEHRP be stacked with federal tax credits? Yes! HEEHRP can stack with federal energy efficiency and electrification tax credits (e.g., 25C and 25D)

HEAT PUMP IN SUMMER AND WINTER

A heat pump is the all-in-one cooling and heating system that keeps your paws comfy year-round. Because of our moderate climate, heat pumps provide an energy-efficient alternative to air conditioners and furnaces.

It’s quiet, has customizable temperatures, and has humidity controls that offer homeowners a great choice for year-long comfort. Call us at 302-738-4144 (DE&PA) or 410-398-2146 (MD). We’ll come to your home and give you an HONEST & FREE ESTIMATE for any Heat Pump Repair, Heat Pump Service, or new Heat Pump Installation.

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