The Inflation Reduction Act
On August 16, 2022, President Joseph R. Biden signed the landmark Inflation Reduction Act (IRA) into law. The law includes $391 billion to support clean energy and address climate change. Information and resources on energy-related incentives and programs to be funded by the IRA are included below:
Home Energy Rebate Programs
The IRA includes $8.8 billion for two residential energy efficiency and electrification rebate programs, the Home Energy Performance-Based Whole House Rebate (HOME Rebates) and the High-Efficiency Electric Home Rebate Program. These Programs will be administered by the U.S. Department of Energy at the federal level and State Energy Offices at the state level (TDEC’s Office of Energy Programs functions as the State Energy Office for Tennessee).
Funding for these programs is not yet available to State Energy Offices. U.S. DOE is currently conducting stakeholder outreach, developing program guidance, and hosting listening sessions with key stakeholders including states, Indian Tribes, labor, and industry. U.S. DOE anticipates releasing a Request for Information (RFI) in early 2023 to solicit public comment on program design considerations to maximize benefits to households and the U.S. economy. Later in 2023, U.S. DOE will make funds available to State Energy Offices and Indian Tribes, as defined by the law.
Home Energy Performance-Based Whole House Rebate (HOME Rebates)
Tennessee’s allocation for the HOME Rebate Program totals $83,877,940. Rebates for energy efficiency retrofits will range from $2,000-$4,000 for individual households and up to $400,000 for multifamily buildings.
- Up to $2,000 for retrofits reducing energy use by 20% or more, and up to $4,000 for retrofits saving 35% or more.
- Maximum rebates double for retrofits of low- and moderate-income homes.
High-Efficiency Electric Home Rebate Program
Tennessee’s allocation to administer the High-Efficiency Electric Home Rebate Program is $83,390,060. Energy efficiency appliances and upgrades covered under this program include:
|Heat pump water heater||Up to $1,750|
|Heat pump for space heating & cooling||Up to $8,000|
|Electric stove, cooktop, range or oven||Up to $840|
|Heat pump clothes dryer||Up to $840|
|Electrical load service center upgrade||Up to $4,000|
|Insulation, air sealing & ventilation||Up to $1,600|
|Electric wiring||Up to $2,500|
|Installation||Up to $500|
There will be a maximum rebate of $14,000 per building, with percentage caps varying by income and building type.
|Building Type||Income||Percentage Cap|
|Single family||80-150% area median income||50% of project costs|
|Single family||Less than 80% area median income||100% of project costs|
|Multifamily||80-150% area median income||50% of project costs|
|Multifamily||Less than 80% area median income||100% of project costs|
Households looking for home energy retrofit assistance today cannot yet access these rebates, but may be eligible for other federal programs, including tax credits or the Weatherization Assistance Program.
More information on the Home Energy Rebate Programs can be found here: https://www.energy.gov/scep/home-energy-rebate-programs. To learn more about how home energy efficiency and electrification rebates available through the Inflation Reduction Act can benefit your family, visit https://cleanenergy.gov/.
Clean Vehicle Tax Credit*
The IRA amended the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and added a new requirement for final assembly in North America that took effect on August 17, 2022, with additional requirements taking place beginning January 1, 2023. More details are provided here and on the list of EVs with Final Assembly in North America.
Commercial Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit*
Beginning January 1, 2023, a tax credit will be available to businesses for the purchase of new EVs and FCEVs. Vehicles with a gross vehicle weight rating (GVWR) below 14,000 pounds (lbs.) must have a battery capacity of at least seven kilowatt-hours (kWh) and vehicles with a GVWR above 14,000 lbs. must have a battery capacity of at least 15 kWh. The tax credit amount is equal to the lesser of the following amounts:
- 15% of the vehicle purchase price for plug-in hybrid electric vehicles
- 30% of the vehicle purchase price for EVs and FCEVs
- The incremental cost of the vehicle compared to an equivalent internal combustion engine vehicle
Maximum tax credits may not exceed $7,500 for vehicles under 14,000 lbs. and $40,000 for vehicles above 14,000 lbs. Businesses may not combine this tax credit with the Clean Vehicle Tax Credit.
Clean Heavy-Duty Vehicle Program
The IRA will invest $1 billion to replace dirty heavy-duty vehicles with clean, zero-emission vehicles, support zero-emission vehicle infrastructure, and to train and develop workers. The U.S. Environmental Protection Agency (EPA) will be distributing this $1 billion in funding for clean heavy-duty vehicles between now and 2031. More information can be found here.
Rooftop Solar Tax Credits*
Under the IRA, households can receive a tax credit to cover 30% of the costs of installing rooftop solar. This credit also applies to solar systems that are paired with battery storage. Starting on January 1, 2023, this credit will also apply to standalone battery storage installed without solar. More information can be found here.
For additional information on how the Inflation Reduction Act benefits the State of Tennessee click here.
*Tennessee Department of Environment and Conservation’s Office of Energy Programs is not providing tax advice. The content on this webpage has been prepared for informational purposes only. It is recommended that you consult a tax professional should you have questions regarding the federal tax credits.