Hurry Up or Wait? How to Talk to Customers About Inflation Reduction Act Incentives

Posted on:

January 12, 2023

The Inflation Reduction Act’s $45 BILLION in rebates and tax incentives for efficiency upgrades will be a huge opportunity for contractors. But your customers already see headlines promising $14,000 rebates, and fly-by-night operators are lining up to steal them away with promises of “free heat pumps from Uncle Sam.”

One thing is clear: Nobody can honestly guarantee today that any given system or homeowner will qualify for an Inflation Reduction Act rebate. ACCA is working to provide you with information and customer resources to fight back so your customers aren’t stuck in limbo, waiting for a rebate that may never come as equipment prices continue to rise.

The Department of Energy anticipates sending guidance for the states to start developing their rebate programs in spring 2023 at the earliest. Your state’s program may not be available until late 2023 or early 2024. Some states may not apply at all.

Tax credits available January 1, 2023, should be your immediate focus, and there are new rules that you and your customers need to be aware of. We have developed a new decision tree to help them decide: Hurry Up or Wait? (accanow.net/IRA-decisiontree)

25C Tax Credits up to $3,200 IF You Buy the Right Equipment.

The biggest new development is the release of regional standards for equipment to qualify for the Energy Efficient Home Improvement Credit (25C), as illustrated by the map here: accanow.net/25CMap_2023.

Two things are immediately apparent:

The new standards are substantially higher than for the old 25C (for which most Energy Star equipment qualified).

ONLY equipment labeled with the new SEER2/EER2/HSPF2 test procedures will qualify. (It appears that an EER2 rating will be a requirement, even in regions that have not required EER testing in the past.)

Hurry up! If a customer was counting on a tax credit for 2022 for equipment labeled SEER/EER/HSPF that meets the old standards, contractors had to install and place the system into service by December 31, 2022. 

Wait! Conversely, equipment already labeled with the new SEER2/EER2/HSPF2 test procedures does not qualify for the 2022 version of the credit (even if it clearly would have qualified on the old test). Equipment with a SEER2 “Energy Guide” label only qualifies if placed into service after January 1, 2023, AND it meets the standards shown on the map referenced above.

Some additional clarifications make the 2023 25C credit even sweeter. The $2,000 credit for a qualifying heat pump CAN be combined with the $1,200 credit for other qualifying improvements. If you combine that new heat pump with an upgraded electrical panel, improved insulation, and/or an efficient furnace, boiler, or water heater, your customer could claim up to $3,200 in tax credits each year.

The new credit also deletes the limitation to primary residences. Starting in 2023, vacation homes or even rental properties can qualify.

ACCA members can spread the word to customers with ACCA’s social media graphics (accanow.net/taxcredit-social) and customizable ComforTool brochure (accanow.net/25c-comfortool).

Visit ACCA’s IRA resources page (accanow.net/ira-resources) for information on other enhanced tax incentives, including the Residential Clean Energy Credit (25D) for solar and geothermal, the Energy Efficient Home and Multi-Family Credit (45L), and the Energy Efficient Commercial Buildings Deduction (179D).

What About My $14,000 Rebate?

For customers willing to wait, the rebates promised in the High-Efficiency Electric Home Rebate Act (HEEHRA) and Homeowner Managing Energy Savings (HOMES) programs could be a game changer.

While theoretically available starting in 2023, each state will administer its own program with its own requirements and application procedures. These rebates are for low-to-moderate-income families, as defined by the Area Median Income (AMI) for any given address.

HEEHRA program rebates of up to $14,000 are only available for families under 150% of AMI, and only families under 80% of AMI qualify for up to a 100% rebate of project costs (subject to caps).

It’s even less certain how HOMES program rebates will be administered. The maximum $8,000 rebate is for families under 80% of AMI. Higher-income families may still qualify for a rebate of up to $4,000. They should carefully consider whether it is worth waiting a year or more; the rising cost of efficient equipment could easily eat away at the possible benefit of an anticipated rebate.

Watch ACCA’s IRA Resources page for additional details about the rebate programs as they become available.