Homeowners can get tax credits through the Inflation Reduction Act to improve energy efficiency and install renewable energy features in their homes. These opportunities generally apply to a taxpayer's primary residence. Second homes are eligible in some cases, but these tax credits are not available for rental properties occupied by tenants.
More grant programs for energy efficiency and electrification for both homeowners and landlords will likely be available in early 2024 (see below).
Because the IRA includes a mix of tax credits and other incentives, the benefits will vary based on the homeowner's specific situation.
A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. You claim this as part of your annual tax return. By contrast, a rebate is an upfront discount that gives you cash back after you make a purchase, and typically happens more quickly than a tax credit.
- Department of Energy Summary of Available Tax Credits
- IRS Energy Efficient Home Improvements & Clean Property Credits FAQs (PDF)
In addition to the tax credits, some households will qualify for grants to make their homes more efficient and to electrify their homes. These grant programs are still being finalized. More information is expected later in 2023, and programs could launch in early 2024.
Energy efficiency tax credits are available on an annual basis, so homeowners can make different improvements each year. For example, they can start with an energy audit and some of the recommended work in one year and then do additional upgrades in subsequent years. The energy efficiency tax credits have an annual maximum of $1,200 (except for heat pumps and heat pump water heaters where the maximum is $2,000).
- Rewiring America's Electrification Upgrades Fact sheet
- Learn More about All of the Energy Efficiency Tax Credits
- Home energy audits (up to $150)
- Insulation materials (up to $1,200)
- Windows, including skylights (up to $600)
- Exterior doors (up to $250 each/$500 total for all exterior doors)
- Efficient air conditioners, efficient heating equipment, and efficient water heating equipment (up to $600)
Learn More about Qualifying Heat Pump Water Heaters
- Electric or natural gas heat pumps, heat pump water heaters, and biomass stoves (up to $2,000 – annual limit may be exceeded)
Learn More about Qualifying Heat Pumps
- Electric panel or circuit upgrades for new electric equipment (up to $600)
- Geothermal heat pumps and solar (water heating) (up to $1,200)
HOMES Rebate Program
The Home Owner Managing Energy Savings program gives states funding to provide homeowners and landlords (including multifamily buildings) rebates for energy efficiency improvements. Wisconsin will receive $74,904,830 for this program. The State will determine the final program design and launch the program after federal approval of the design.
Rebates will then be available for energy efficiency retrofits ranging from $2,000-$4,000 for individual households, and up to $400,000 for multifamily buildings. Up to $2,000 will be available for retrofits that reduce energy use by 20% or more, and up to $4,000 for retrofits saving 35% or more. Available rebate allowances will double for low and moderate-income homes. More information will be available later in 2023, when the State creates its plan, and the program should launch in early 2024.
High-Efficiency Electric Home Rebate Program
The High-Efficiency Electric Home Rebate Program grants individual states funding to provide homeowners and landlords (including multifamily buildings) rebates for home electrification, including electric panel upgrades, heat pumps, induction stoves, etc. Wisconsin will receive $74,470,200 for this program. The state of Wisconsin will determine the final program design and, following federal approval of that design, launch the program.
Once launched, rebates will be able to cover up to 100% of cost for households at or below 80% of area median income (which was $81,331 in Portage County in 2022) and 50% for households between 80-150% of area median income. Households above 150% of area median income are not eligible for this program. More information will be available when the program is launched, likely in summer/fall 2023.
Tax credits of up to 30% of eligible expenses for residential solar installation are available, with no dollar cap or income qualifiers. These credits are available for all costs associated with solar installation and any battery storage.
A typical residential rooftop installation in Wisconsin provides about 7 kilowatts and costs about $24,000 (costs vary based on size, complexity, and other factors). The tax credit for a $24,000 installation is $7,200, which would reduce the installation cost to $16,800.
Two sections of the Inflation Reduction Act define tax credits for electric vehicles. Preliminary guidance from the IRS suggests that the rules will be slightly different under each section.
Purchasing New electric vehicles
- $3,750 credit for electric vehicles with batteries produced in North America
- $3,750 credit for electric vehicles using a certain percentage of critical battery minerals extracted or processed in the United States
- Total tax credit available is $7,500
- To be eligible for the tax credits, Pickups, SUVS, and vans must cost less than $80,000, and cars must cost less than $55,000
- Some models are exceptions to this limit and have an $80,000 MSRP cap
- Household income requirements for the tax credits:
- Joint tax return less than $300,000
- Head of household less than $225,000
- Single-payer less than $150,000
- Plug In America's List of Eligible Cars and their Price Caps
- Department of Energy's List of Eligible Vehicles
Purchasing Used electric vehicles
- $4,000 tax credit or 30% of vehicle’s sale price
- Vehicle’s model must be at least two years older than the current new model year and total vehicle cost must be less than $25,000
- Income requirements:
- Joint tax return less than $150,000
- Head of household less than $112,300
- Single-payer less than $75,000
- IRS Guidance on EV Credit for Purchased Vehicles
Leasing New Electric Vehicles
When a company leases a vehicle, it can access a commercial vehicle EV tax credit, and will usually pass those savings onto the leasee. The preliminary IRS guidance suggests that leased Electric Vehicles do not fall under the same Buy American requirements as purchased EVs, so some vehicles that are not eligible for a tax credit if purchased will be eligible for a tax credit when leased.