Inflation Reduction Act (IRA) Energy Incentives

The Inflation Reduction Act (IRA) is a federal law that is the largest investment in domestic energy production and promotion of clean energy in United States history. Passed by the Senate on August 7, 2022 and signed into law on August 16, 2022, this legislation aims to tackle climate change by creating clean energy jobs and striving towards a net-zero economy by 2050.

The IRA developed rebate programs and tax incentives for homeowners to invest in energy efficient technologies. Arlington County will be applying for grant funding to expand and promote new and existing AIRE programs. Tax incentives for residents are available for use as of January 1, 2023. The rebate program will be managed by each state's energy office with DOE approval. The Virginia Department of Energy is currently developing plans for rolling out the rebates, with an expected launch of early 2025. Stay tuned to this page for programmatic updates.

What is the Difference Between a Tax Credit and a Rebate?

Tax Credits

A tax credit is a dollar-for-dollar amount taxpayers claim on their tax return to reduce the income tax they owe. If a tax refund is issued, the tax credits can increase the amount in the refund. If taxes are owed, the credits can lower the amount in dollars owed. To claim the benefit of tax credits outlined in the Inflation Reduction Act, taxpayers must file the specific IRS form for which they are claiming credits.

Rebates

A rebate is an upfront discount provided by a retailer or contractor for the purchase of an eligible product or service.

Overview of Energy Efficiency Upgrades Eligible for IRA Incentives

Click each tab to learn more about the types of energy efficiency upgrades eligible for a tax credit or rebate.

IRA Tax Credits

The IRA tax credits have been available as of January 1st, 2023.

The IRS is managing several different energy efficiency upgrade programs available to residents. Some applicable upgrades include:

Renewable Energy

Purchase of clean energy equipment, including rooftop solar, wind turbines, and battery storage systems.
- See Residential Clean Energy Credit

Home Energy Improvements

Energy efficiency improvements, including heat pumps, efficient air conditioners and heaters, insulation, and electrical circuit upgrades
- See Energy Efficient Home Improvement Credit

Home energy audits

See Energy Efficient Home Improvement Credit

Electric Vehicles

Note: The Department of Energy released new guidance on Dec 1, 2023 that outlines requirements on the sourcing of materials for electric vehicles. The new guidelines would cut the tax credit incentive to 50% beginning on Jan 1, 2024 for EVs with battery components that do not meet the DOE requirements. The list of EVs eligible for 100% or 50% tax credit starting in 2024 is subject to change. Before purchasing an EV in 2024, confirm with the seller or manufacturer the available tax credit for that make and model.

New electric vehicles purchased in 2023, with an available credit up to $7,500
- See Credit for New Clean Vehicles - Purchased in 2023 or After
- See also Credits for New Electric Vehicles Purchased in 2022 or Before
Purchases of previously-owned clean energy vehicles (electric vehicles or fuel cell vehicle) may be eligible for a maximum credit up to $4,000
- See Used Clean Vehicle Credit

Note: Income limits may apply. See IRS Guidance for tax credit limits, additional details, and requirements.

If you are interested in seeking a tax credit incentive, please consult your financial or tax advisor for further information on claiming credits on your annual tax return.

Energy Rebates

Through the IRA, two new residential energy rebate programs were created: The Home Energy Performance-Based, Whole-House Rebate (HOMES) Program and the High-Efficiency Electric Home Rebate (HEEHRA) Program. HOMES is designed to provide rebates for whole-house energy efficiency upgrades, while HEEHRA is designed to provide upfront discounts on the purchase of high-energy electric home appliances.

The Virginia Department of Energy is currently planning the distribution of the rebate programs and full guidelines have not yet been released. Rebates are expected to be made available to Virginia residents in early 2025. This page will be updated as programmatic guidelines become available.

Additional resources

Below are additional links to understand the IRA incentives and other financing programs available to Arlington residents.