New Incentives for Energy Efficiency, Electrification and Renewable Energy through the Inflation Reduction Act!

The 2022 federal Inflation Reduction Act (Public Law 117-169, 136 Stat. 1818, August 16, 2022) included a significant investment in clean energy and climate action. As it was passed through the budgetary reconciliation process, there is no regulatory component, only funding to incentivize energy efficiency and the transition of the energy market from fossil fuels to renewable energy. What does that mean for you? These funds will be available for 10 years. Now is the time to take advantage of these significant tax credits and rebates to improve the efficiency of your home and/or transition your home, business or vehicle to electric to save money and energy! Rewiring America estimates that the average home that transitions to all-electric saves about $1800/year! *

The IRA is a huge piece of legislation that will take time to implement. The departments within the federal government are working to implement this legislation, but all the pieces aren't in place yet. CCSBP will share updates here as we have them.

This is a summary of the residential tax credits and rebates that are available, or will be available soon. Note that renters qualify for rebates for appliances, mechanical equipment and vehicles. 

Residential Tax Credits and Rebates

  • Residential Energy Efficiency Tax Credits §25C - This is a 30% federal tax credit for home energy efficiency improvements with specDone Editingific caps on the amounts for individual elements. See this IRS Frequently Asked Questions document for more information.
  • Residential Clean Energy Property Tax Credits §25D - An uncapped 30% federal tax credit for renewable energy systems for labor and components including battery storage. 
  • New Energy Efficient Home Tax Credits §45LThis is an incentive for builders to obtain Energy Star or Zero Energy Ready certification for their homes. Available for single-family, multifamily and manufactured homes.
  • Clean Vehicle Tax Credit §30D - This is a a $7500 tax credit for new electric vehicles, dependent on Manufacturer's Suggested Retail Price (MSRP) and income limits. Starting this year, the credit will also be subject to geographic manufacturing requirements that may initially restrict the list of eligible models. 
  • Previously Owned Clean Vehicle Tax Credit §25E - This is a 30% tax credit up to $4,000 for used electric vehicles, dependent upon MSRP and income limits.
  • HOMES Program Rebates - This federal funding for performance-based whole house rebates will be distributed through State Energy Offices. To qualify you must show an increase in home energy efficiency of 20% through modeling or 15% through measured energy savings for your home retrofit. Arizona does not currently have a State Energy Office, but the governor's office is creating a Water and Energy Innovation Initiative that may handle the responsibility for this funding. We will update this webpage when we learn more. This can be used in conjunction with the Residential Energy Efficiency Tax Credits.
  • High-Efficiency Electric Home Rebate Program (HEEHRA) - This is an exciting program designed to help low- and middle- income households electrify their homes. Funds for it will also come through the State Energy Office. It provides up to $14,000 in up-front discounts for the purchase of high efficiency electric appliances and mechanical systems to replace gas versions. The program covers 100% of purchase costs for low-income households and 50% for middle-income. Renters qualify for HEERA rebates as well! It is anticipated that these rebates will be available in late 2023.

Note: The § numbers denote the tax code section.

Visit Rewiring America IRA Savings Calculator to easily determine the incentives you qualify for based on your income and location.

Check out the Rewiring America Go Electric Digital Guide to learn more about the benefits of electrifying and the incentives available.

Visit this IRS website about the Inflation Reduction Act for frequently asked questions and further information. The IRS will be updating the website as they continue work on implementation of the IRA.

*This Rewiring America estimate is for homes that improve their energy efficiency to current energy code, utilize heat pump technology for heating, cooling and water heating, replace their gas-powered cars with electric vehicles and install solar PV for their energy needs.

Commercial Tax Credits

  • Energy Efficient Commercial Buildings Deduction  - A tax credit for primarily for building owners, though tenants may be eligible if they pay for construction expenditures. Credit is $1.88/square foot for owners of new or existing buildings who install (1) interior lighting; (2) a building envelope; or (3) heating, cooling, ventilation, or hot water systems that reduce the energy and power cost of the interior lighting, HVAC, and service hot water systems by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1.  
  • Commercial Clean Vehicle Credits - This is a credit for the commercial purchase of electric or other zero-emission vehicles. The credit is up to $40,000 for qualified electric medium and heavy-duty trucks and up to $7,500 for light-duty. 
  • Alternative Fuel Refueling Property Credits -  This is a tax credit for electric vehicle charging and alternative fuel infrastructure installed in low-income or rural census tracts. It is available to businesses, individuals and non-tax-paying entities including local governments.
  • Federal Solar Tax Credits for Businesses

We are currently in the process of updating our Sustainable Building Incentives Directory that includes state and local incentives for sustainable building in addition to these federal ones. In the meantime, please see this website for other federal and state incentives, and the City of Flagstaff's webpages if you live within City limits. You are able to utilize federal, state and City incentives for the same work.