"The Inflation Reduction Act"
"The Inflation Reduction Act"
On August 16, 2022, President Joe Biden signed the Inflation Reduction Act (IRA) into law. The IRA aims to ease inflation by lowering the cost of prescription drugs, reducing the deficit, and halting global warming. The IRA is the most comprehensive federal legislation addressing climate change. It invests $369 billion in clean energy sources and technologies that improve energy efficiency. In addition, the act includes offering significant rebates and tax incentives to homeowners who purchase new heat pumps. As a result, many Americans will be eligible for a free heat pump to heat and cool their home in 2023.
What Does A Heat Pump Do?
A heat pump is a home appliance that warms and cools your residence. It’s a more energy-efficient option than a furnace and AC compressor.
In the hotter months, a heat pump pulls warmer air from inside your home and moves it outside. In the chillier months, it does the opposite, collecting heat from the outside air and moving it inside.
Older heat pump models could not heat efficiently in frigid temperatures. So, they are generally less prevalent in colder areas of the country. Fortunately, new technologies let modern heat pumps operate effectively in temperatures below 0℉.
Since you use electricity to power a heat pump, they’ve been slow to catch on in areas with primarily older homes with gas hookups. Typically, gas is less expensive than electricity, so individuals with access to a gas hookup often prefer to use it for everyday heating needs.
Why A Heat Pump?
Part of the Inflation Reduction Act funds the development of renewable energy sources. These sources include solar, hydro, and wind. Energy made by these means they produce no carbon emissions, so it’s considered “clean” energy.
The government wants to eventually move away from energy sources that burn fossil fuels, including gasoline, towards clean, renewable electricity sources. The first step towards that goal is for homeowners to upgrade to energy-efficient appliances. The IRA supports an infrastructure that eventually swaps out conventional energy for a cleaner variety.
Besides the improved energy efficiency, heat pumps have several advantages over conventional heating equipment, like a furnace:
- Cost savings
- Space savings
- Lower utility bills
- Better air quality
- Improved safety
- Less noise
One of the tremendous benefits is that buying one could save you a hefty amount, thanks to the Inflation Reduction Act.
What is the High-Efficiency Electric Home Rebate Act (HEEHRA)?
The IRA provides rebates or tax deductions to homeowners who install an energy-efficient heat pump. The High-Efficiency Electric Home Rebate Act is the official name of the Inflation Reduction Act’s heat pump incentive program. It offers point-of-sale rebates on heat pumps for home heating and cooling up to $8,000. “Point-of-sale” means the rebate amount is deducted automatically from the cost at the time of sale. Therefore, there is no need to send in for a refund.
The High-Efficiency Electric Home Rebate Act rebates are available for low- and moderate-income households. The amount of each refund depends on your household’s income and the heat pump you choose.
The Inflation Reduction Act - Heat Pump Rebate/Refund
If the income in your household is 80% below your area’s average, you receive the maximum rebate, covering your new heat pump 100% up to $8,000. If the income in your household is 81-150% of your area’s average, you’ll receive up to 50% of the heat pump’s price.
If your household income surpasses 150% of your area’s average income, you’re not out of luck. These homeowners can receive a 30% tax credit of up to $2,000 on a new energy-efficient heat pump.
The HEERHA heat pump rebates are most significant for low-income homeowners. According to HomeAdvisor’s statistics, heat pumps cost an average of $5,792. So, in most cases, low-income households will get a brand-new heat pump for no cost at all.
Middle-income households save an average of $2,896 on a brand-new heat pump. And above-middle-income families receive an average tax credit of $1,737.60.
How Can I Get A Heat Pump RebateThe information about getting a heat pump rebate has yet to be available. State governments will execute the HEEHRA rebates. The Department of Energy will likely issue state guidelines in the spring of 2023 and the IRA heat pump tax credits will go into effect at the same time. To receive your tax credit, you must save your receipt and declare it on your yearly tax return.
When do the heat pump rebates start?The Department of Energy said in November 2022 that funding would be available to each state beginning in spring 2023. Rebates will open to the public later in the year. If you can’t wait until then, the government currently has a lesser $300 tax credit for heat pumps that meet the criteria of the Consortium for Energy Efficiency’s top-tier efficiency standards.
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