But in 2024, rebates for clean appliances will start coming down the pipe for lower-income individuals — meaning immediate cash back, with no need to wait until April to file taxes. And changes to the electric vehicle tax credit are also in the works, with the option of getting $7,500 off right at the dealership.
Those individual technologies sound small, but they can add up. According to data from researchers at Princeton University, consumer actions — such as greening a home or switching to a clean car — could account for around 30 percent of the climate law’s emissions benefits over the next decade. That means that solving the climate crisis will require individual people to choose different technologies for their homes and how they travel.
So should you spring for a heat pump or electric vehicle now — or wait until 2024?
Buying in 2023: Tax credits
- You make over 150 percent of your area’s median income (and won’t be eligible for most rebates). Check your eligibility here.
- You have multiple upgrades in the works and might need to spread them out across multiple years.
The Inflation Reduction Act’s tax credits are designed for middle- and higher-income Americans: You have to owe enough in taxes for the credit to be worth it. For example, if you want to get a $7,500 tax credit on a new electric car, you have to make at least $67,000 to get the full tax credit back.
Kristin Eberhard, senior director of state and local policy at the electrification nonprofit Rewiring America, advises families with the financial means to act now. The tax credits will still be available in future years, but some credits have yearly limitations — a taxpayer can claim only $1,200 per year for sealing up their home or an electrical panel or $2,000 per year for a heat pump or heat pump water heater. That means that people who have multiple projects in mind may want to spread their installations out across multiple years: solar panels one year, a heat pump and better insulation the next.
“Max out your tax credit this year, and then look at what you want to do next,” Eberhard said.
Meanwhile, families making more than 150 percent of their area’s median income won’t qualify for most of the rebates. This tool from Rewiring America allows you to calculate whether you will be eligible, based on income and Zip code.
The most impactful technologies Americans can jump on are home solar panels, electric cars and heat pumps. But other, smaller-scale interventions — such as upgrading a home electrical panel for the future — can be powerful as well. Americans can also get $150 off a home energy audit to learn how to better insulate their homes.
- You make less than 150 percent of your area’s median income and will be eligible for rebates. Check your eligibility here.
- You don’t owe enough in taxes to make use of the current tax credits.
Next year, the IRA’s tax credits will be joined by upfront rebates for middle- and lower-income individuals. Americans making less than 150 percent of their area’s median outcome will be eligible for rebates on various appliances: induction stoves, electrical panels and heat pumps. (That 150 percent threshold can vary widely — for a family of four in Westchester County, N.Y., the threshold will be $227,100; in Wheeler County, Ga., the threshold would be closer to $90,000.) And individuals at any income level can take advantage of a program offering cash for homes that successfully save energy.
It’s an $8.8 billion program that could help thousands get access to money- and carbon-saving technology. “These are groundbreaking new rebates,” said Kara Saul-Rinaldi, president and CEO of the AnnDyl Policy Group. “These are federal rebates that have never existed before.”
By stacking these rebates together, AnnDyl Policy Group estimates that a low-income family could get up to $22,000 to upgrade a home. A medium-income family could get around $19,000.
Those with lower incomes may want to wait for the rebates — but it could take awhile. State energy offices will roll out the rebates over time and will move at different speeds. Some states have energy offices with hundreds of staff, while others have only a few employees. All of them will have to prepare to manage a program that involves training contractors, verifying family incomes and more.
“Only certain states will be getting them in ’24, probably closer to end of ’24,” Saul-Rinaldi said.
And the leader of one state has already indicated that it won’t accept the funding: Florida Gov. Ron DeSantis (R) signaled that he will turn down the $341 million allocated for his state by rejecting the administrative funding intended to run the program. Florida has until August 2024 to reverse course and apply for the funding; if it doesn’t, the cash will be reallocated to other states.
The electric vehicle tax credit will also change next year. Starting in January 2024, car buyers will be able to get the credit directly at the dealership — instead of having to file their taxes and wait until the following April. But dealerships that don’t apply and go through the process won’t be able to offer the credit. And some car dealers have been hesitant to offer and invest in EVs.
Waiting for the rebates is a good option for those with less disposable income who may need the cash up front to make big purchases. But it could take significantly longer and involves more uncertainty about how and when states will be ready.
Saul-Rinaldi said states trying to administer clean energy rebates are taking their time to get things right. She encourages interested customers to keep tabs on state energy offices, as the cash will go fast. “This is a tremendous opportunity for Americans to rethink how their home uses energy,” she said. “And how they can individually help with the climate crisis.”
