A Breakdown of How the Inflation Reduction Act Could Impact the District (Updated 11/4/2022)

Tags: Energy Efficiency, Inflation Reduction Act, Rebates, Tax Credits

We gathered a run-down of the Inflation Reduction Act and how it's rebates and tax credits will affect the District

President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022, marking the largest investment in climate infrastructure in U.S. history. For those working in or interested in clean energy and climate change, this groundbreaking law will stand to have long-lasting, positive impacts on residents, businesses, and the environment.

This massive law details many provisions centered around clean energy. Yesterday, the White House launched CleanEnergy.gov to provide guidance on rebates and tax credits offered by the law.

“These programs will provide low and moderate-income homeowners with new and improved financial benefits to make home improvements that significantly reduce their energy bills and carbon footprint.  It will help us make significant progress in the fight against climate change," said Tommy Wells, Director of the DC Department of Energy and Environment (DOEE).

Below, we’ve gathered high-level summaries of certain portions of the law and how it could impact DC residents and businesses, along with links related to the tax credits and rebates that are expected to be available because of the IRA. The information is directly from several national organizations’ analyses of the law, including Rewiring America and the Bipartisan Policy Center.

As written, the IRA directs all funding for efficiency rebate programs through State Energy Offices. In the case of the District of Columbia, this means the District Department of Energy & Environment (DOEE), which administers the DCSEU contract. As this funding becomes available, the DCSEU will communicate with our customers and partners about what, if any, role we will have. Please note rebates are not yet available.

Please consult with a tax professional about tax credits to understand how they may impact upgrades you have already made or plan on making to your home.

Tax Credits for Residential Clean Energy

  • Extends the tax credit through 2034 for residential solar and other renewable energy projects.
  • Maintains the previous credit rate but adjusts the project dates. Applies a 30% tax credit for projects started between 2022 and 2032. Tax credit decreases to 26% for projects started in 2033 and 22% for projects started in 2034.
  • Expands eligibility to battery storage technology.
  • What could this mean for DC residents? DC is already one of the best places in the country to go solar due to an aggressive Renewable Portfolio Standard. The extension of the 30% tax credit will make going solar even more attractive in the District, and the addition of battery storage technology can help customers increase their home’s and the electricity grid’s resilience.

Tax Credits for Energy Efficiency Home Improvements (Beginning in the 2023 tax season)

  • Extends credit for energy efficiency home improvements through 2032.
  • Covers purchase and installation of improvements.
  • The 10% credit for the 2022 tax season will increase to 30% in 2023.
  • Replaces lifetime cap on tax credits; annual credit resets each year, up to $3,200 in total.
    • Increases limit to $2,000 for heat pumps and heat pump water heaters.
    • $1,200 annual credit limit for other weatherization measures, including $600 for windows and $500 for doors.
    • Expands credit to cover the cost of home energy audits up to $150 and electrical panel upgrades up to $600.
  • What could this mean for DC residents? This will increase the cap on credits for making energy efficiency improvements in your home, encouraging more investments on an annual basis. This provision will also allow for credits on home energy audits and electrical panel upgrades for residents to move toward electrification.

High-Efficiency Electric Home Rebate Act (HEEHRA)

  • Rebate funding available through fiscal year 2031 administered by State Energy Offices and Tribal Governments.
  • These rebates are anticipated to be offered as point-of-sale discounts.
  • Provides up to $14,000 per household in rebates for electric qualified electrification projects, including $8,000 for heat pumps, $1,750 for heat pump water heaters, and $840 for electric stoves.
  • Also includes rebates for improvements to electrical panels or wiring and home insulation or sealant. Importantly, this explicitly includes rebates up to $4,000 for “electric load service center upgrades,” i.e., main panel upgrades or “heavy-ups”, and up to $2,500 for “electric wiring”, as well as $1,600 for basic weatherization (insulation, air sealing, and ventilation).
  • Contractors can receive up to $500 incentives.
  • Multifamily buildings may qualify if 50% of residents are low- to moderate-income
  • Eligible recipients must fall below 150% of the area median income. These provisions are capped at 50% of qualifying costs for households making between 80% and 150% of area median income (AMI).
    • Area medium income for a family of 4 in DC ($142,300)
      • 80% AMI --$113,840
      • 150% AMI --$213,450
    • You will not be permitted to combine these rebates with other federal rebate programs, including Residential Efficiency and Electrification Rebates. The IRA does not, however, prohibit combining federal rebates with state-level rebates
  • What could this mean for DC residents? These significant rebates could help residents make infrastructure upgrades required to decarbonize and electrify their homes and makes it more affordable for residents making 80% to 150% of AMI. Further guidelines, including a timeline for these rebates, will be determined state by state as programs develop.
  • See Rewiring America's fact sheet about this program.

Support for Low- to Moderate-Income Communities

  • Home Energy Performance-Based Whole House Rebates (HOMES)
    • Funding will be available to help state energy offices implement a HOMES rebate program to provide rebates to homeowners and aggregators for whole-house energy saving retrofits. Rebates will be provided based on the percentage of energy savings achieved in your home. Rebates will be doubled for low- and moderate-income (LMI) individuals who earn less than 80% of the area median income (up to $8,000 capped at 80% of project cost).
    • Includes a prohibition on combining rebates from other federal grant or rebate programs (for the same measures or equipment), including the High-Efficiency Electric Home Rebate listed above.
    • What could this mean for DC residents? This will allow the opportunity for low-income residents to make crucial efficiency updates to their homes with less out-of-pocket expenses.
  • Energy Credit for Solar and Wind in Low-Income Communities
    • Creates a 10% investment tax credit increase/adder for solar or wind projects located in a low-income community and 20% investment tax credit increase/adder for facilities part of low-income residential housing or low-income economic benefit projects.
    • What could this mean for DC residents? This could further encourage the development of community solar in LMI communities in the District, such as the work DOEE and the DCSEU have done on Solar for All.

For a simple way to determine how tax credits and rebates may impact you and your home, Rewiring America has provided this calculator tool.

Grants for State-Based Home Energy Efficiency Contractor Training

  • $200 million in funding through DOE to provide state energy offices with grants for the training of contractors on energy efficiency and electrification upgrades, including those in the above residential energy efficiency rebates and tax credits.
  • What could this mean for DC businesses? This funding could help the contracting community gain necessary training and certifications to meet market needs that will be accelerated by the IRA rebates and tax credits.

How the DCSEU has been Preparing the District

The DCSEU will continue to support the District’s residents, businesses, and workforce to be prepared to respond to the increased investment in green infrastructure.

Through Train Green and the Workforce Development programs, we work with District CBEs, CBE-qualified firms and residents to gain the training and certifications necessary to meet energy efficient contractor needs. These programs are provided at no cost to participants.

IRA funding will allow further investment in the District towards guaranteeing contractors are prepared to meet market needs, in particular, for the Building Performance Energy Standards (BEPS).

Through the Solar For All/ HVAC replacement program, the DCSEU is already providing income-qualified residents with access to solar, as well as helping them upgrade from natural gas heating and water heating to electric heat pumps and heat pump water heaters, all at no cost to them.

The expansion of clean energy tax credits and future rebates will allow more DC residents to upgrade their homes and generate additional energy savings while cutting their carbon emissions to ensure a healthier environment.

As the federal government and states begin the process of allocating funding, we encourage businesses, contractors, and residents to hold onto receipts and paperwork for any upgrades or equipment purchased for your home while paying attention to specific state rules as they roll out.

Media Contact

Jahmai Sharp
[email protected]
(202) 677-4847