Your Guide to Incentives: Federal Rebates for Heat Pumps And More

There are three main programs that homeowners can tap into when upgrading their home to energy-efficient equipment.

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Homeowners Incentive Programs

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Tax Credit - 25C

A 10-year program providing tax credit of 30%, up to $2,000, for qualifying heat pump installation

HEEHR

Single-home heat pump cost offset may be as high as $8,000 per participating home

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HOMES

Homes with energy reduction of 35% are eligible for maximum rebate of $4,000.

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More on these programs below:

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Energy Efficient Home Improvement (25C) Tax Credit

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Learn more details about the 25C Tax Credit here.

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• Begins with tax year 2023 (January 1, 2023), claim credit in 2024 on your 2023 taxes.
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• Up to $600 per item: breaker panel, insulation, fossil fuel systems (meeting elevated efficiency limits) with maximum of $1,200 tax credit.
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• Additionally, a separate cap of 30% up to $2,000 is applicable for the category of heat pumps and heat pump water heater installations.
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• The heat pump system must meet or exceed the highest performance tier set by the Consortium for Energy Efficiency (CEE).*
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• Resets every year, so households may claim on any installations completed during the tax year for any, and each, year through 2023.
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• Households must have adequate tax liability to offset.
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• You may qualify to receive a tax credit and a rebate for the same project.
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*Efforts are underway to simplify the efficiency performance qualifications. Check back soon for updates.

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High Efficiency Electric Home Rebate Program (HEEHRP)

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• Likely to begin in 2024.
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• Allocates $4.5 billion in grants to states and tribal governments for home energy improvement projects including point-of-sale heat pump rebates.
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• 10-year program, administered through State Energy Offices.
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• Parameters of state-administered programs may vary.
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• Designed to support low-to-moderate income (LMI) households.
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Example:

• Households making up to 80% of area median income are eligible to receive a 100% rebate of up to $8,000 on the cost of heat pump installation.
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• Moderate-income households (making 80-150% of area median) are eligible for a 50% rebate up to the same limits.
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• E.g., To claim up to the cap of $8,000, must spend $16,000 in heat pump installation dollar-for-dollar.
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• Households with incomes above 150% of area median are not eligible.
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• Single-home maximum cost offset is $14,000
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Caps per qualified equipment type:

• $8,000 for a heat pump.
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• $1,750 for a heat pump water heater.
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• $1,600 for insulation, air sealing, and ventilation.
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• $2,500 for electric wiring.
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• $4,000 for an electric load center upgrade.
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• $840 for a stove, cooktop, range, oven, or heat pump clothes dryer.
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• Up to a $500 rebate may be available for contractors per heat pump installation - details pending.
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• ENERGY STAR® will be the criteria to qualify heat pump systems.
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• HEEHRP and HOMES grant funds cannot be used to double pay for the same measure within any home.

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HOMES Rebate Program

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• Likely to begin late fall 2023
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• Provides funding to DOE for state energy offices ($4.3 billion) to develop and implement a rebate program to homeowners and aggregators for whole-house energy saving retrofits.
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• Based on modeled energy savings (measured in kWh, or kWh-equivalent) for single and multifamily.
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Potential rebate levels:

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• Homes with energy reduction of 20% are eligible for maximum rebate of $2,000, or half the cost of the retrofit project (whichever is less).
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• Homes with energy reduction of 35% are eligible for maximum rebate of $4,000.
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• Homes with energy reduction of 35% and qualify as lower income (<80% of area median income) are eligible for maximum rebate of $8,000.

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