Inflation Reduction Act FAQs

Under the IRA, two Home Energy Rebate programs were created, the Home Efficiency Rebates program and the Home Electrification and Appliance Rebates program. Together, these programs will invest over $8 billion in electrification and efficiency upgrades throughout the U.S. Neither rebate program is available yet.  

The Home Efficiency Rebate (HER) program (formerly known as HOMES) is designed for single- and multifamily whole-home upgrades, including weatherization and air-sealing. These rebates may be available for all income levels and are doubled for low-income customers.  

The Home Electrification and Appliance Rebates (HEAR) program (formerly known as HEEHRA) is specific to electrification appliance upgrades, including air source heat pumps, heat pump water heaters, kitchen appliances, and some building material upgrades. This program does have income guidelines, though the State has leeway to adjust eligibility and rebate amounts through its program design.  

The federal guidance for the program design offers a framework in which eligible recipients must fall below 150% area median income (AMI), and low-income customers can get up to 100% of project costs covered. The maximum rebate that can be claimed under this program is $14,000. 

Currently, the Minnesota Department of Commerce expects these rebates to be available to homeowners between late 2024 to early 2025. Once these programs are live, it is expected that they will be available through 2032 or until all funds are used, whichever is earlier. To see a full breakdown of the rebate program timeline and stay up to date, you can visit the Minnesota Department of Commerce Website.  

The 25C tax credit is currently available, and we encourage homeowners to take advantage of them!  There are no income requirements for earning the tax credits. You cannot receive an IRA credit that is larger than your tax liability. If you complete qualifying work this year and other qualifying work in a different tax year, you can earn the tax credit for each qualifying project. In other words, completing projects over time is a good way to maximize this incentive. Find more information about the tax credits here.  

This tax credit is available for qualified high-efficiency equipment, weatherization (insulation, window, doors) projects, and electrification projects including heat pumps, heat pump water heaters, and more. You can find a full list of qualifying upgrades here.  

With the tax credit, homeowners can earn up to 30% of qualified expenses, including qualified energy efficiency improvements, residential energy property expenses, and home energy audits. The maximum credit homeowners can earn each year is $2,000 for heat pumps and heat pump water heaters, and up to $1,200 for all other upgrades, including insulation, air conditioners, furnaces, boilers, water systems, and more. In total, homeowners can earn up to $3,200 per year with the 25C tax credit. For most eligible projects, this tax credit can be applied to both labor and material costs. The one exception to this is insulation projects. The credit will only apply to the insulation materials, not the cost of hiring an insulation contractor. 

To earn this tax credit, you will need to work with your contractor to make sure that the specific equipment, product, or material you are using will qualify for the credit. Then, when you file for your taxes, you will have to provide your project information and apply for the credit. To make this process as easy as possible, we encourage customers to ask their contractor to provide the material and labor cost on their final paid invoices.  

Yes. The 25C tax credit will be available through 2032 and will not run out of funds before then. The rebate programs will be available while funds last, but we expect the rebate programs to last more than one year. Once the programs are approved, the rebates will be available until the funding runs out. At this point, we cannot estimate how long the funds will last based on uptake, but we expect the state to provide insight into this as part of the required program evaluation they will conduct with the Department of Energy.   

Home Efficiency Rebates (HER): These rebates may be retroactive, but we are still learning about the qualifications.  

Home Electrification Appliance Rebates (HEAR): No. Rebates under the Home Electrification Appliance Rebates program will not be retroactive. Electrification appliance upgrades under that program are eligible for rebates only if they occur after the State has received its grant award.  

The State of Minnesota will be responsible for determining income eligibility. The process of determining eligibility will be specified within the State’s program applications for the rebate programs. The State can also offer larger rebates for low-income customers. More information will be available once the State has submitted its applications. However, we do know that income eligibility will ultimately be based on AMI. Information on AMI in Minnesota can be found here. Rewiring America also offers a savings calculator that can help homeowners see their potential savings opportunities.  

Yes, customers will be able to stack (i.e., combine) tax credits and other rebate programs on top of their Home Efficiency Rebate and Home Electrification and Appliance Rebate. States are highly encouraged to design their rebate programs in a way that allows for the most effective combinations of various funding sources. Currently, we expect the 25C tax credit, other financing sources including federal loans and CEE’s statewide and city loans, and state, utility, and local rebates to stack on top of each other to maximize upgrade savings.  

For the 25C tax credit, the federal rebate amount must be subtracted prior to determining the total credit that can be applied to the project. However, we do not yet know if state and utility rebates will have to be subtracted before the tax credit can be applied. The state will need to provide additional information regarding how or when any state and/or utility rebate amounts must be subtracted to determine the tax credit amount eligibility. 

For homeowners that have many eligible energy efficiency upgrades to make, we recommend prioritizing which upgrade is most crucial to make now, then waiting for the following year to make additional upgrades to maximize the 25C tax credit. If insulation is one of the improvements your home needs, we always recommend focusing on that improvement first. Ensuring your home is properly insulated and air sealed is the crucial first step for any electrification project, like installing a heat pump or heat pump water heater, as it will help these systems run at maximum efficiency.  

One way homeowners can prepare for the incentives that are yet to come is to get a Home Energy Squad (HES) visit. This visit will help determine which improvements will have the greatest impact on your home’s efficiency. After your HES visit, CEE’s Energy Advisor service will help you follow up with recommended improvements and serve as a resource as you navigate the upgrade process. When thinking about energy upgrades, we recommend that homeowners first weatherize their home. This includes proper insulation and air sealing. Tackling weatherization projects first is the best way to prepare for any electrification projects in the future. 

We also recommend taking advantage of the tax credits that are already available. If you are ready to make efficiency improvements to your home now, we don’t recommend waiting. Currently, you can take advantage of the 25C tax credits and the robust utility rebates that are already available.

For the IRA tax credits, you can stay up to date by checking the Energy Star and IRS websites. 

For the IRA Rebate Programs, you can stay up to date by checking the Home Energy Rebates page on the Minnesota Department of Commerce website. 

Finally, you may have heard about a state residential heat pump rebate program that passed into Minnesota law early last year (2023). This program will be designed to complement the federal program, as more details become available. You can check here for updates on the state residential heat pump rebate program. 

Deciding whether to complete a project now or wait for the rebate programs will vary for everyone. The main factors to consider is how quickly you need to make the upgrade, what incentives are available now that you are eligible for, and what is the likelihood that your household income will fall within the IRA rebates income limits. For example, if you know that your heating system needs to be replaced in the near future, or you need to insulate your attic within the next year, it is likely not worth waiting for the rebates to become available. Right now, the 25C tax credit and robust utility rebates are available and can significantly help offset the cost of your weatherization and electrification upgrades. However, if these upgrades aren’t urgent, and you think you may fall within the household income limits, waiting might make sense for you.  

For more information on whether you should act now or wait, check out this blog post from the ASHP Collaborative.