The Inflation Reduction Act was enacted by Congress and signed into law by President Biden in August 2022. Among its many provisions, it addresses climate change and energy security throughout the US and in western states particularly. To improve energy security, it includes the High Energy Electric Home Rebate Act (HEEHRA), which facilitates various improvements for American homes through up-front discounts, tax credits, and low-cost financing of electric appliances: heat pumps that replace furnaces and water heaters, electric stoves, and dryers. Further, it subsidizes upgrades of home electrical panels and wiring.
The IRA will be administered by State Energy Offices (SEOs) and Indian tribes; in California, the SEO is the California Energy Commission. In summer 2023, the US Department of Energy will publish guidance for these offices to establish administration and receive funds. Because the Energy Commission has yet to set up a system for distributing funds, rebates are not yet available; they’re expected in late 2023 and in 2024. Unfortunately, rebates will probably not be retroactive, but purchases made in 2023 are eligible for tax credits.
Qualifying homes can receive up to $14,000 for electrification projects. Qualifying for these advantages is based on household income in relation to Area Median Income (AMI), a statistic determined by the federal government’s Department of Housing and Urban Development (HUD). You can find your AMI here. A household with income less than 80% of AMI is considered “low-income” with regard to HEEHRA and can have 100% of costs covered; a household with income between 80% and 150% of AMI is considered a “moderate-income” household and have costs covered at 50%, but still up to $14,000. All households regardless of income can receive tax credits. Income verification methods are yet to be determined by the Energy Commission.
Depending on your situation, you may have the opportunity to add or upgrade solar panels and/or a storage battery; the IRA also boosts the Residential Clean Energy credit, which lets a household installing solar (which can now include residential battery storage) deduct 30% of the project’s cost from its taxes. This tax credit can also apply to geothermal systems.
The IRA also enhances the Clean Vehicle credit, which currently offers a credit of $7500 for a new electric vehicle or $4000 for a used one. Starting in 2024, these will become up-front discounts.
If you’re making decisions for your household, you’ll have the choice for each appliance to replace it now or to continue to use it until it fails, then buy a replacement. Once you’ve replaced appliances with electric models, your household won’t carry the risk of childhood asthma linked to gas stoves or other health issues related to burning natural gas. Further, your energy costs will be less volatile and no longer at the mercy of the global oil and natural gas markets.