Navigating the Inflation Reduction Act

Total Funding: $4.3 billion

(available through September 2031 or until expended)

State Energy Offices will set up new Home Energy Performance-Based, Whole-House (HOMES) Rebate Programs.

• Rebates are doubled for low- and moderate-income individuals making less than 80 percent of Area Median Income.
  • See your area's median income here.
• Contractors providing retrofits under HOMES state programs can also claim a $200 rebate per home serviced in an underserved community.
• IRA prohibits combining HOMES rebates with any other Federal grant or rebate – including the new High-Efficiency Electric Home Rebate Program.
• IRA does not prohibit combining HOMES rebates with state/utility rebate programs.
• IRA does not prohibit combining HOMES rebates with federal tax credits like 25C (Energy Efficient Home Improvement Credit).
• HOMES rebate programs will feature an array of tiered incentives for consumers based on two different pathways to home performance: modeled energy savings and measured energy savings.

HOMES Tiered Incentive Pathways

HOMES rebate programs will feature an array of tiered incentives for consumers based on two different pathways to home performance: modeled energy savings and measured energy savings.

Modeled Energy Savings Pathway

Projects using the modeled energy savings pathway must be calibrated to historical energy usage for a home consistent with BPI 2400. DOE guidelines will provide more details.

Measured Energy Savings Pathway

Projects using the measured energy savings pathway must use open-source advanced measurement and verification software, as approved by DOE, to determine and document monthly and hourly (if available) weather-normalized home energy use, both before and after home efficiency retrofits. DOE guidelines will provide more details.

Total Funding: $4.5 billion

(available through September 2031 or until expended)

State Energy Offices will set up new Home Electrification and Appliance Rebate (HEAR) programs. These programs will provide point-of-sale rebates for electric appliances for exclusively low- and moderate-income households. Rebates cannot be combined with HOMES rebates, but IRA does not prohibit combining rebates with federal tax credits and state/utility rebates.

• Rebates are capped at $14,000 total per recipient.
• For households with less than 80% Area Median Income, 100% of costs are covered. For households with between 80-150% Area Median Income, 50% of costs are covered.
• $225 million is reserved for tribal communities.

Total Funding: $200 million

DEADLINE TO APPLY: JAN. 31, 2024

(available through September 2031 or until expended)

State Energy Offices can now apply for *$150 million in funding from the Training Residential Energy Contractors Grants (formally Contractor Training Grants) to develop and implement programs to support training home energy efficiency and electrification contractors. The Administrative and Legal Requirements Document (ALRD) provides guidance to State Energy Offices on the application process for formula funding.

Eligible Uses of Funds

• Reduce the cost of training contractor employees.
• Provide testing and certification of contractors.
• Partner with nonprofit organizations to develop and implement grants.

*$200,000,000 total, including $150,000,000 to be distributed to states through a formula in two installments, and up to $40,000,000 to be distributed to states through a competitive process. Details on the competitive process have not yet been announced.

UPDATE: Under the One Big Beautiful Bill Act of 2025, the Energy Efficient Home Improvement Credit (25C) is now scheduled to terminate at the end of 2025.

Previously, the Inflation Reduction Act of 2022 (H.R. 5376) extended and enhanced the 25C credit through 2025. It expanded the benefit by allowing taxpayers to deduct 30% of the cost of qualified home energy upgrades—including insulation, windows, heat pumps, and more—up to an annual limit. The law also removed the previous lifetime cap, turning 25C into an annual, renewable credit for eligible improvements made each year. However, unused credits cannot be carried forward.

The One Big Beautiful Bill does not extend 25C beyond its current expiration date, meaning taxpayers must complete qualifying improvements by December 31, 2025, to claim the credit.

• 25C is available now for qualifying upgrades placed in service on or after January 1, 2023. Consumers claim the credits when filling out their tax returns via IRS Form 5695, including any relevant product receipts.
• 25C expands the credit to allow households to deduct 30% of the costs of eligible upgrades from their taxes while adding new qualified products and larger dollar maximums.
• Up to $600 per item: breaker panel, insulation, fossil fuel systems (meeting elevated efficiency limits) with maximum of $1,200 tax credit.
• Heat pump water heaters, air source heat pumps, biomass stoves and boilers have a separate yearly credit limit of $2,000.
• In a single year, taxpayers may claim up to $3,200 in tax credits for combined upgrades, provided costs fall under each sub-limit.
• IRS Factsheet
• Home Energy Auditor Qualified Certification Programs

Click here to download our 25C tax credit fact sheet.