Heralded as the single largest investment in climate and energy in American history, the Inflation Reduction Act (IRA) introduces extended and enhanced possibilities for U.S. homeowners to implement cost-effective, value-adding home performance improvements through a combination of rebates, tax incentives, grants, and loan guarantees.
The "IRA Savings Calculator" by Pearl Certification offers users insights into the potential rebates and tax credits offered under the Inflation Reduction Act, which they may be eligible for. This valuable information is generated using user-provided details, including household address, household income, homeowner status, and household size, via the Savings Calculator form. After a user submits the required data, a new tab opens displaying results values under Total Incentives, Available Electrification Rebates, Available Home Efficiency Rebates, and Available Tax Credits which represents the potential incentive amounts users may qualify for depending on the program type. Additionally, the IRA Savings Calculator offers guidance on how to combine these incentives, which is also presented in this article.
How Are Available Incentives Calculated?
The IRA Savings Calculator estimates rebates and tax credits values based on program requirements determined by the Department of Energy, with eligibility at times contingent on a user's annual earnings relative to Area Median Income (AMI). To account for this, the calculator utilizes the Department of Housing and Human Development (HUD), as well as a resident's Federal Information Processing Standard (FIPS) county code for determining AMI tiers that an individual or family falls into. The following represents the calculator's area median income tiers, based on household size:
- Less than 80% AMI
- 80%-150% AMI
- Greater than 150%
HUD generates the 80% Area Median Income (AMI) for households ranging from 1 to 8 individuals, however, income tiers greater than 80% are calculated internally. These qualification tiers play a crucial role in ensuring the calculator achieves greater accuracy in producing more precise estimations for both Total Incentives and individual available program values.
With this knowledge, let's now take a closer look at the distinct incentive programs that are represented within the calculated Total Incentive amount and explore how AMI factors into the qualification process.
Home Electrification and Appliance Rebates
Home Electrification and Appliance Rebates, also known as High-Efficiency Electric Home Rebates (HEEHRA), help low (less than 80% AMI) and moderate (80%-150% AMI) income residents create energy-efficient homes, save on monthly utilities, and lower their carbon footprints through point-of-sale rebates on electrification appliances and equipment, home electrification and appliance rebates offers. Eligibility for these rebates accounted for in the Home Electrification and Appliance Rebates Total is contingent on annual earnings relative to the median household income in a specific area. While households with an AMI less than 80% receive 100% of the rebate maximum and households with an AMI 80%-150% receive 50% of the rebate maximum, households with an AMI greater than 150% are ineligible to claim the incentive. The maximum lifetime amount of Home Electrification and Appliance Rebates an eligible household can claim is $14,000 and is therefore represented in the available total. The following is a breakdown of what rebate maximum amounts are included in the program, again capped at $14,000:
Although the IRA itself became effective on January 1, 2023, states are currently in the process of opting in and developing their individual programs. As a result, access to Home Electrification and Appliance Rebates is unavailable at this time, however the program is scheduled to continue until September 30, 2031. The IRA Savings Calculator presents eligible values in the "Available Electrification Rebates" total and designates the Home Electrification and Appliance Rebate timeline as "Expected Availability - 2024". It is important to note that rebate programs may vary by state, and as such, we cannot guarantee the specific amounts generated by the calculator. Values from the Available Electrification Rebates category are incorporated and calculated within the overarching Total Incentives amount at the top of the results page.
Home Efficiency Rebates
Home Efficiency Rebates (HOMES) also assist homeowners in establishing energy-efficient homes, reducing monthly utility costs, and decreasing their carbon footprints, but unlike providing point-of-sale rebates on equipment purchases, this program offers rebate incentives based on the actual performance of the home. While low-income households (less than 80% AMI) qualify for significant and easily accessible up-front discounts through Home Electrification Rebates, Home Efficiency Rebates are particularly suitable for non-LMI households (80% and above AMI). The IRA Savings Calculator factors in two distinct energy-efficiency pathways a homeowner has available:
Modeled-performance rebates
Modeled-performance rebates are based on the projected ability of an improvement to increase a home's energy efficiency as compared to historic usage. Contractors or other program implementers will use energy modeling software to establish an initial baseline for a home's energy consumption and to propose a new energy model depending on the type of retrofit being undertaken and the home's historical energy usage. The modeled-performance rebate is contingent on annual earnings relative to the median household income in a specific area (AMI), however differs from Home Electrification and Appliance Rebates in that all household incomes above 80% qualify to receive benefits. Here is a breakdown of rebate amounts a user can expect from this model:
*States may increase the maximum amount available for low-income households upon approval from DOE.
It is worth noting that projects that result in energy savings of less than 20% are not eligible for Home Efficiency Rebates, regardless of cost. If you are concerned about the risk of investing in a home improvement project that doesn’t earn you a rebate, you can help protect your investment by selecting a Pearl Network Contractor. Log in to the free Green Door app and use the Contractor Search to locate a qualified contractor near you.
Considering that homeowners have the flexibility to select any of the HOMES program savings options, the IRA Savings Calculator factors the maximum opportunity amount, which is a 35% or greater Energy Savings rebate, into the total Available Home Efficiency Rebate. For single-family household incomes below 80% AMI, the available amount is capped at $8,000.
Measured-performance rebates
Unlike modeled-performance rebates, measured-performance rebates are based on a home's actual energy performance. These rebates require the use of an approved open-source measurement and verification (M&V) software to measure and verify ya home's energy savings based on historical and future utility bills. From a consumer perspective, the homeowner will receive the rebate up front, most likely through an aggregator, who would in turn be paid once the savings are demonstrated. The following is a breakdown of rebate amounts users can expect from this model:
As mentioned above, the IRA Savings Calculator incorporates the maximum opportunity amount, which is a 35% or greater modeled-performance Energy Savings rebate, and represents this amount in the total Available Home Efficiency Rebates. Values from the Available Home Efficiency Rebates are incorporated and calculated within the overarching Total Incentives amount at the top of the Savings results page.
Whether, modeled-performance or measured-performance rebates, it's worth noting that a distinctive feature of the HOMES rebate program is its inclusion of a third-party certification requirement. Broken into two parts below for clarity, it stipulates:
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To receive rebates through the HOMES program, homeowners must also receive third-party certification that documents their home performance improvements.
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This documentation must enable homeowners to recapture some or all of the value of those investments at time of sale.
As with the Home Electrification and Appliance Rebates, states are currently opting in and developing their individual programs, therefore, specific amounts generated by the IRA Savings Calculator cannot be guaranteed. The calculator designates an estimated timeline as "Expected Availability - 2024".
Tax Credits
The IRA Savings Calculator captures those Inflation Reduction Act tax credits designed to promote the use of clean and efficient energy sources by homeowners. In most cases, tax credit incentives do not carry income limitations, and if eligible, may be combined with Home Electrification and Appliance Rebates and Home Efficiency Rebates. Below are tax credits incorporated in the IRA Savings Calculator Available Tax Credits amount along with their respective amounts:
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Energy Efficient Home Improvement Tax Credit (Code § 25C): The overall maximum that can be claimed each year for 25C tax credits is capped at $3,200.
- $1,200 maximum for energy property costs and certain energy efficient home improvements, with limits on:
- electrical panels ($600)
- exterior doors ($250 per door and $500 total)
- windows ($600)
- insulation ($1,200)
- air sealing ($1,200)
- home energy audits ($150)
- furnaces ($600)
- boilers ($600)
- air conditioners ($600)
- $2,000 maximum per year for qualified heat pumps, biomass stoves or biomass boilers
- $1,200 maximum for energy property costs and certain energy efficient home improvements, with limits on:
- Clean Energy Tax Credit (Code § 25D): 25D tax credits do not come with a specified maximum amount, and therefore, are not factored into the Available Tax Credits total. Instead they are denoted by a "+" sign signaling that homeowners have increased incentives available.
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Used Clean Vehicle Credit (Code § 25E): The maximum allowable credit of $4,000 is incorporated for a used electric vehicle for all taxpayers with the following income limits:
- $150,000 for married couples filing jointly
- $112,500 for Individuals who file as head of household
- $75,000 for all other single tax filers
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New Clean Vehicle Credit (Code § 30D): The maximum allowable credit of $7,500 is incorporated for the purchase of a new electric vehicle for all taxpayers with the following income limits:
- $300,000 for married couples filing jointly
- $225,000 for individuals who file as head of household
- $150,000 for all other single tax filers
- Electric Vehicle (EV) Charging Station Tax Credit (Code § 30C): 30% of the refueling property cost, up to a maximum of $1,000 credited.
Maximum values noted above are calculated in the Available Tax Credits total and incorporated within the overarching Total Incentives amount at the top of the Savings results page.
Can Home Electrification and Appliance Rebates and Home Efficiency Rebates Be Combined?
Given the program rules and requirements, in most cases a homeowner is only eligible to receive rebate incentives from either the Available Electrification Rebates or the Home Efficiency Rebate, but not both. This is why it is important for a homeowner to understand the federal rules and guidelines for each program and choose with a program that works best. The Total Incentives amount on the IRA Savings Calculator results page combines both the values from Available Electrification Rebates and Available Home Efficiency Rebates, representing the programs available for a home based on user input. However, it does not ultimately indicate what a user will choose to claim.
Should a household meet both rebate program’s eligibility requirements, rules for stacking Home Electrification and Appliance Rebate and Home Efficiency Rebate incentives according to the State and Community Energy Program Requirements and Instructions are as follows:
- A single address cannot receive a rebate from both HOMES and Electrification for the same measure. To implement this, the DOE database will not allow the following:
- No electrification rebates will be made for addresses that are in the process of receiving a rebate for measured savings (and vice versa), with the exception of rebates for electric load service centers or electric wiring.
- No electrification rebates will be made for addresses where a modeled rebate has already been given for that upgrade.
Can Rebates and Tax Credits Be Combined?
The IRA continues to share guidance on how IRA rebates and tax credits can be combined, but with most cases, yes, rebates and tax credits can be combined for additional savings. Keep in mind, Pearl Certification does not provide tax preparation services, nor guarantee that a user qualifies for these or other tax credits or rebates. Tax credits can only be used to offset federal taxes owed, and homeowners cannot qualify for tax credits if they have no tax liability for the year. For questions regarding tax liability status, consult a qualified tax professional.
How Are the Incentive Totals Broken Down?
In summary, to best understand the calculated estimated values offered by the IRA Calculator, consider the following examples based on AMI eligibility:
Example #1:
Below 80% AMI:
Total Incentives: $37,700
Available Electrification and Appliance Rebates:
$14,000 - Electrification Rebates
Available Home Efficiency Rebates:
$8,000 - 35% or above energy reduction rebate
Available Tax Credits:
3,200 - 25C Tax Credits
4,000 - Used Car Tax Credit
7,500 - New Car Tax Credit
1,000 - Electric Vehicle Charger
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$15,700+ - Total ("+" represents 25D tax credits)
Example #2:
80%-150% AMI:
Total Incentives: $32,700
Available Electrification and Appliance Rebates:
$14,000 - Electrification Rebates
Available Home Efficiency Rebates:
$4,000 - 35% or above energy reduction rebate
Available Tax Credits:
3,200 - 25C Tax Credits
4,000 - Used Car Tax Credit
7,500 - New Car Tax Credit
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$14,700+ - Total ("+" represents 25D tax credits)
For questions about this article, the IRA Savings Calculator or other Pearl Certification products or services contact our customer support team at help@pearlcertification.com.
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