There is a lot to celebrate in regard to the funds distributed through the Inflation Reduction Act, though there are also challenges. Various inequalities are associated with access to the benefits and with the advancement of electrification in areas with high electric rates.  Fair utility rates help to ensure that this act’s benefits help to improve conditions for all Americans.

Here are some of the exciting and positive results of this bill two years in.  

1) Provides up to $3,200 in tax credits annually for heat pump HVAC, heat pump water heaters, air sealing, insulation, inspections conducted by BPI/HERS raters, and electrification efforts

2) Additionally, states are starting to launch $22,000 off-the-top rebates for the efficiency items listed above.  The rebates will be announced state-by-state through January 2025.

2) Provides 30% or higher tax credits on solar, batteries, and ground source heat pumps (and more for nonprofits through the direct pay program)

3) Provides up to $5,000 and $5.00 per square foot per unit for DOE Zero Energy Ready Certified Homes and Multifamily buildings that save energy

4) Provides up to $7,000 for the purchase of new electric cars and $4,000 for the purchase of used electric cars

The housing tax credits are actually more popular than the federal government projected, with 3.4 million households claiming them in 2023. According to CNBC, “The average household got a $5,084 residential clean energy credit and an $882 energy efficient home improvement credit, according to a U.S. Treasury Department analysis.” A close connection of GreenHome Institute received credit for a new Rheem Proterra 120-volt heat pump water heater, greatly reducing the household’s overall tax obligation!

If you or your clients want to claim these tax credits this year, GHI put together a one-hour training on how and why to do this and how to organize home upgrades across multiple years in the most cost-effective way. This is a free webinar session with CEUs available!

Regarding politics, lawmakers on both sides are finding benefits for their constituents with this program.

However, the Inflation Reduction Act still has considerable downsides and issues.

First, the LA Times reports the states are slow to get the rebates out to people in need, and sadly, many people who have been promised these rebates since 2022 have grown frustrated and have given up on the process. At least at least 40% of the rebates themselves are supposed to go to the Justice 40 group; those living in underserved areas and below the poverty line. However, as The Guardian reports, without these rebates, the tax credits still primarily serve those who are well-off: “Nearly half of those who claimed at least one of these credits last year had incomes lower than $100,000. Yet roughly 75% of tax filers had incomes lower than $100,000 in 2023, and a closer look at the use of the credits by households within that bracket shows that wealthier Americans more frequently adopted both tax credits.” In West Michigan, under our West Michigan Green Affordable Housing program, we are working to help those who earn less than 125% of the Area Median Income get access to these tax credits and rebates.

Even if heat pumps were available to all at no cost, there is still a concern with high electric rates and artificially low methane gas rates. In Michigan and other states, relying on an air source heat pump may increase utility expenses, so we are working to ensure that 1) We get fair electrification utility rates, especially for those who are income qualified, 2) We braid in the funding of other programs to weatherize and solarize and 3) Matching utility rebate funds, such as those that could come through new fuel-switching laws (such as the one passed in the state of Michigan), are allowed. We are also lobbying to support allowing dual-fuel applications such as the Mitsubishi Intelliheat to be funded as an add-on to existing working and safe gas furnaces to add the outdoor heat pump instead of AC, which can work in the shoulder seasons but kick the gas on in the winter to keep costs affordable as a transitional strategy prior to full electrification.

Therefore, let’s take a second today to celebrate the two-year anniversary of the Inflation Reduction Act. Tomorrow, we need to keep fighting to improve this program and hold our elected officials accountable by saying the IRA is not enough and that we need to go further and faster to help ensure every American can live better.