The Pearl App Guide to Insulation, Air Sealing, and Ventilation Rebates and Tax Credits – Pearl Certification

Air is everywhere. And while you cannot see it, the benefits of improving your home's air quality are impossible to miss. Indoor air pollution has been regularly linked to severe heart and lung disease, while poor insulation is often responsible for leaky homes and equally leaky bank accounts.

That's because when air escapes, your HVAC system is forced to work overtime to achieve adequate temperatures. At the same time, outside air is also moving in, entering back through those very same cracks and passing over a whole host of undesirable elements that can contaminate the air you breathe.

Upgrading your insulation and air sealing can save you an average of 15% on your heating and cooling costs and create a healthier living environment for you and your family. Fortunately, the government has made available a number of rebates and tax credits to help you save, and we'll walk you through everything you need to know in order to take advantage of those savings right here.

How Much Does an Upgrade Cost?

The true costs of upgrading your home with better insulation, air sealing, and ventilation are difficult to predict. It's a multi-step process that will involve preliminary air tests before moving forward. And even then, there are many materials available to achieve the right results, further complicating the calculations. Here's a bit about what you can expect when working out the costs:

Your contractor will likely want to start with a blower-door test to determine the overall "air tightness" of your home and identify which areas are most responsible for leakage. Next, they'll move on to air sealing, patching up any areas that revealed themselves to be overly porous during the blower-door test. That can involve any combination of caulking around windows and door frames, or applying spray foam around pipes and re-padding insulation. If your insulation is in good shape, you may be able to get by with just reinforcing what's already there. If not, your contractor may recommend you move on to new insulation.

Here's where the choices begin. There are a variety of insulation materials to choose from, including fiberglass, cellulose, and spray polyurethane foam, each with varying degrees of effectiveness (and price tags to match). Then, when it's all said and done, and you're ready to choose your new whole-house ventilation system as a preventative finishing touch, you'll have just as many new choices to make, with each system type boasting its own set of pros and cons to weigh.

That's why it's helpful to work with a Pearl Network Contractor, who has met stringent qualifications, to lead you through the process and help you make the right choices for your home.

Rolling Out the Rebates

The 2022 Inflation Reduction Act (IRA) has allocated $8.8 billion in rebates to incentivize homeowners to undertake energy-efficient home upgrades, along with key tax credits that can help you save on purchases and installations related to air-quality projects.

High-Efficiency Electric Home Rebate Act (HEEHRA)

HEEHRA is a $4.5 billion-dollar allocation designed to help low- and moderate-income homeowners save on environmental-friendly home upgrades. HEEHRA is a point-of-sale rebate, meaning when you purchase a product or service related to air sealing, ventilation, or insulation, you should see savings automatically.

This rebate covers new purchases like heat pumps and electrical appliances but also makes room for "enabling measures,” giving you money back on upgrades to ventilation, air sealing, and insulation.

Here's how much you stand to save through HEEHRA depending on your household income:

Low-income homeowners: 100% rebate (up to $14,000) for households making less than 80% of their area median income (ARI)
Moderate-income homeowners: 50% rebate (up to $14,000) for households making between 80-150% of their ARI

Homeowner Managing Energy Savings program (HOMES)

The second rebate program, HOMES, works a bit differently. HOMES offers rebates based on actual home performance in place of point-of-sale, and divides them into two groups: modeled-performance and measured-performance rebates.

Modeled-performance rebates

Modeled-performance rebates are calculated based on the projected amount of how much a new addition, like improved air sealing, ventilation, and insulation, will impact the overall energy efficiency of your home.

Making that calculation involves running a BPI-2400-compliant energy modeling software that can establish a baseline value for your home's energy usage and propose a new model based on its historic usage.

Since cost savings are based on energy savings, you'll need to hit certain benchmarks to trigger rebates under HOMES.

If you're a low- or moderate-income household, and you achieve energy system savings of at least 35%, you'll be eligible for the lesser of $8,000 or 80% of the project cost. If you achieve less than 35%, but more than 20%, you'll be eligible for the lesser of $4,000 or 80% of the project cost.

For high-income homes, the numbers look something like this:

Energy system savings of at least 35% are eligible for the lesser of $4,000 or 80% of the project cost.
Energy system savings of less than 35% but more than 20% are eligible for the lesser of $2,000 or 80% of the project cost.

Measured-performance rebates

If modeled-performance rebates are based on projected efficiency, measured-performance rebates cover actual performance. Through use of an approved open-source measurement and verification (M&V) software to confirm your home's energy efficiency, rebates will be dispersed based on the following benchmarks:

For low- and moderate-income homes: Retrofits that achieve energy system savings of at least 15% are eligible for a payment rate per kilowatt hour saved, or kilowatt hour-equivalent saved, equal to $4,000 for a 20% reduction of energy use for the average home in your state or 80% of the project cost.
For high-income homes: Retrofits that achieve energy system savings of at least 15% are eligible for a payment rate per kilowatt hour saved, or kilowatt hour-equivalent saved, equal to $2,000 a for a 20% reduction of energy use for the average home in your state — or 50% of the project cost.

Note that the bill doesn't specify that homeowners pursuing measured-performance rebates are automatically given the lesser of the amounts above, but it may be wise to assume so for your planning.

With states still working out how to implement these incentives, these rebates are expected to be available later in 2023 and will be available until September 30, 2031. Unfortunately, energy savings of less than 15% don't qualify for measured-performance rebates. Modeled performance rebates give you a little more leeway, with energy savings under 20% not being eligible for rebates.

How Do I Secure My Rebates?

When it comes to the amount of work you'll need to do to secure your rebates, HEEHRA is likely the easiest. As a point-of-sale reimbursement, savings should be triggered and applied right at the time of purchase.

No guidance has been made available yet with regards to the process involving HOMES, though it's likely it will be more involved. Be prepared to submit documentation that details performance measurements of your home upgrades, as well as any costs related to purchase and installation. It's also important to note that participation in these programs isn't mandatory, so states can elect not to recognize them. You can use Rebates Finder in the Pearl App to bring up an updated list of rebates in your area. It refreshes automatically, so check often.

Energy Efficient Home Improvement Tax Credit (Code § 25C)

One of the new tax credits that should help you falls under Code § 25C. Dubbed the Energy Efficient Home Improvement tax credit, this credit covers, among other things, "building envelope" components — that's building jargon for walls, windows, doors — basically, all areas that will likely be touched during a home-air audit and upgrade.

What does that mean for you come tax time? It's simple. Products or expenditures related to "insulation materials or systems and air sealing materials or systems" make you eligible for a rebate of up to $1,200 or 30% of project costs on your annual tax returns.

Claiming the credit is fairly straightforward too. Simply include IRS Form 5695 on your tax return. Once you've calculated the credit on Part I (and entered the amount on your 1040), if the total is greater than the amount of income tax you have due, the difference will be carried over to the following year. Forgot to file your credit by the time taxes are due? No worries! The government allows it to be retroactively claimed. Just file an amended return after the fact to claim your savings.

Clean air and better insulation are great first steps toward building your new high-performing home. From there, you may want to explore other options that help you save even more on your monthly utility bills. Upgrading to electric appliances, switching to solar power or implementing heat-pump-powered climate control are great next steps — and there are even more tax credits that can help you save on purchases and expenditures related to those items as well. Be sure to check out our deep-dive into tax credits and rebates to see how you can save on your home upgrade from end to end.

Do It All With the Pearl App

With savings options as diverse as service options, upgrading your insulation, air sealing, and ventilation can be an overwhelming juggling act. Not to mention that in addition to federal tax credits and rebates, many state and municipal governments and even manufacturers and programs such as ENERGY STAR^® offer credits and incentives of their own.

Don't let analysis paralysis take hold — take advantage of every savings opportunity at your disposal with The Pearl App's Rebates Finder. Creating an account is free, and once you're on the app, you'll be able to browse local rebates and tax credits and even get the documentation you need to claim them all in one place. The app is updated regularly to ensure you always have the most current information at your fingertips.

With the amount of work and materials involved in insulation upgrades and air sealing, working with an experienced contractor is a must if you're hoping for maximum energy efficiency to take advantage of savings. The vetted pros in the Pearl Network can help you make the right product and service choices for you and ensure work gets done the right way to set you up for a Pearl Certification.

Change is in the air — so if you're ready to take the next step, log in to the Pearl App to start exploring your insulation, air sealing, and ventilation options today.