link to page 1 
November 28, 2022
The Inflation Reduction Act: Financial Incentives for
Residential Energy Efficiency and Electrification Projects
Introduction
years, the materials and practices at the time of construction
P.L. 117-169, commonly known as the Inflation Reduction
may not perform as well as today’s materials and practices.
Act of 2022 (IRA), includes a number of provisions
While the IRA does not specify what retrofits would satisfy
affecting energy use in the buildings sector. The IRA
its requirements, these might include efficient windows,
appropriates $9 billion for residential energy efficiency and
doors, and insulation materials.
electrification financial assistance programs. These include
consumer rebates and funds for technical training.
Applicants can demonstrate savings by comparing energy
consumption before and after the retrofits, either through
The IRA includes $4.3 billion to award grants to state
use of building energy models that estimate the energy
energy offices (SEOs, defined in §124(a) of the Energy
performance of the whole house, or by measured
Policy Act of 2005 (P.L. 109-58)) to develop and
performance. The energy savings requirements and the
implement Home Energy Performance-Based, Whole-
rebate calculation differ for the two methods.
House Rebates, also known as a HOMES (Home Owner
Managing Energy Savings) rebate program. In addition, the
For modeled performance, the rebate is awarded at two
IRA provides $4.275 billion available to SEOs and $225
different levels depending on the how much energy savings
million to Indian tribes to implement high-efficiency
is achieved. As shown in Table 1, for retrofits of SFHs that
electric home rebate (HEEHR) programs. A further $200
achieve a 20% energy savings, an owner or aggregator is
million is appropriated for SEOs to provide training and
eligible for rebates of 50% of project cost, with rebates
education to contractors involved in these rebate programs.
capped at $2,000; for low- or moderate-income (LMI)
households, rebates increase to 80% of project cost, up to a
The energy efficiency rebates are determined by energy
cap of $4,000. For SFHs achieving at least a 35% reduction,
savings of the whole house. The electrification rebate
the caps are doubled. The IRA defines LMI households as
supports a menu of projects, including replacing appliances,
those with income below 80% of area median income; these
adding insulation, and upgrading the in-home electrical
income values are estimated at https://www.huduser.gov/
delivery system itself. The two rebate programs have
portal/datasets/il.html.
unique means-testing provisions and cost recovery rates and
caps, as explained further below.
Table 1. HOMES Rebates Based on Modeled Energy
Savings for Single-Family Homes
To receive the funds, the SEOs apply for grants from the
U.S. Department of Energy (DOE). The statute specifies
Rebate
Rebate Cap
that DOE determine the amount of funds for each state
at least 20% energy savings,
using DOE’s allocation formula in effect on January 1,
but less than 35%
2022. This In Focus provides highlights of the statutory
programs but does not describe all the details, some of
if LMI household 80% of cost
$4,000
which will be determined by the SEOs.
all other households 50% of cost
$2,000
The programs exemplify two main trends in home energy
at least 35% energy savings
efficiency programs. In the first, during the 1980s and
if LMI household 80% of cost
$8,000
1990s, energy efficiency programs focused on single
appliances or systems (e.g., windows), complemented by
all other households 50% of cost
$4,000
appliance efficiency standards, information campaigns, and
Source: §50121(c) of Inflation Reduction Act of 2022 (P.L. 117-169).
other policies. The second trend, which evolved later,
Notes: IRA defines LMI households to have income below 80% of
includes initiatives aimed at whole-house energy
the area median income for purposes of HOMES rebates.
performance. The rebates based on whole-house
improvements necessitated the development of
measurement methods and computer modeling platforms
For MFBs, the projects are eligible for a rebate of $2,000
for simulation of energy consumption in the home.
per dwelling unit, provided they achieve a reduction of
20%-35%. The total of all rebates in one MFB cannot
Whole-House Rebates (HOMES)
exceed $200,000. For at least a 35% reduction, the rebate
per dwelling unit and the cap per building are doubled.
Section 50121 of the IRA offers HOMES rebates for energy
efficiency upgrades that improve the overall energy
performance of a single-family home (SFH) or multi-family
The rebate structure differs slightly for MFBs with 50% or
more of dwelling units occupied by LMI households.
building (MFB). As building stock can be in place for many
https://crsreports.congress.gov
link to page 2 The Inflation Reduction Act: Financial Incentives for Residential Energy Efficiency and Electrification Projects
Energy savings of 20%-35% qualify retrofits for rebates of
qualified electrification projects (QEPs), which may
80%, up to a cap of $4,000 per dwelling unit. For energy
include: heat pumps for water heating, up to $1,750; heat
savings of at least 35%, the cap is $8,000 per dwelling unit.
pumps for space heating, up to $8,000; and electric stoves
In either case, there is no per-building maximum.
or electric heat pump clothes dryers, up to $840.
The second way to show eligibility for rebates is by
The IRA also funds rebates for QEPs that enable
measurement. Provided that retrofits achieve at least a 15%
electrification. These include up to $4,000 for an electric
energy savings, homeowners are eligible for a rebate of
load service center upgrade and up to $2,500 for electric
50% of the project cost, or, alternatively, a reimbursement
wiring upgrades. The IRA also includes rebates of up to
calculated per kilowatt-hour of energy saved. Consultants
$1,600 for insulation, air sealing, and ventilation. The total
who assist homeowners with participating in the rebate
of all rebates is generally limited to $14,000 per household,
program (i.e., aggregators) are also eligible. For LMI
and new equipment generally must be Energy Star certified
households or MFBs having at least 50% of dwelling units
(42 U.S.C. §6294a). Further, an entity that receives one of
that are LMI households, owners or aggregators are eligible
the above rebates and performs the installation may receive
for a higher rebate of 80% of project cost, or, alternatively,
up to an additional $500, provided the amount is
a reimbursement per kilowatt-hour of energy saved, with no
commensurate with the scale of the installed upgrades.
statutory cap. The rate is $100 per 1% reduction in energy
consumption of the average SFH or MFB in the state;
The means testing falls into three tiers. Households with
multiplying this rate by the homeowner’s actual energy
income below 80% of the AMI may claim a rebate for the
savings gives the amount of the rebate. For LMI households
full expense of their upgrades, up to $14,000. Those whose
or MFBs having at least 50% of dwelling units that are LMI
income is 80% or more but generally not greater than 150%
households, the per-kilowatt-hour rate is twice as large, or
of the area median income are eligible for rebates of 50% of
$200 per 1% reduction in the state average. These are
their costs, up to $14,000. Households are generally not
summarized in Table 2.
eligible for rebates if their income is greater than 150% of
the AMI. Certain entities determined by DOE who install
Table 2. HOMES Rebates Based on Measured Energy
upgrades in such households are also eligible, according to
Savings
the same means-testing schedule.
Means
Rebate
Rate (alternative
Owners of MFBs, or certain entities who install upgrades in
Testing
Rebate
Cap
method)
MFBs (as determined by DOE), are eligible for 50% of the
if LMI
80% of
none
$200 per 1% of
value of the above rebates if at least 50% of dwelling units
are households with incomes generally not greater than
households
cost
reduction from avg.
150% of AMI. If at least 50% of dwelling units are
home energy use
households with incomes below 80% of AMI, the rebate
all other
50% of
none
$100 per 1% of
increases to 100%.
households
cost
reduction from avg.
home energy use
State-Based Home Energy Efficiency
Contractor Training Grants
Source: §50121(c) of Inflation Reduction Act of 2022 (P.L. 117-169)
Notes: IRA defines LMI (low- or moderate-income) as income below
Section 50123 of the IRA also appropriates $200 million
80% of the area median income for purposes of HOMES rebates.
for SEOs to provide training and education to contractors
Measured energy savings must be at least 15% for the rebate option.
and organizations involved in the rebate programs.
How Rebates Will Be Made Available
The IRA includes requirements on both methods—modeled
The funds appropriated for the rebate program are to be
and measured energy savings. For modeled energy savings,
made available to SEOs based on plans submitted to DOE,
the IRA requires models to adopt a specific technique,
as described in §§50121(b) and 50122(b). The IRA directs
ANSI/BPI-2400, for calibrating the building energy models.
DOE to make funds available to states in amounts set
Analysis has shown that such calibration improves the
according to a statutory allocation formula and, for HEEHR
accuracy of the predicted energy improvements.
of §50122, to tribes in a manner determined appropriate by
the Secretary of Energy.
The IRA requires measured performance evaluations to use
open-source advanced measurement and verification
DOE announced its anticipated timeline on November 2,
software. DOE maintains a list of such software (which
2022, and plans to hold a series of listening sessions to
includes its own self-developed software).
engage with states and tribes, labor, industry, and others.
Thereafter, DOE is to issue a Request for Information,
There is an additional rebate of up to $200 to certain
anticipated in early 2023. DOE expects that the funding to
entities performing HOMES retrofits on behalf of eligible
states and tribes will be available by spring 2023. The SEOs
entities in disadvantaged communities as determined by the
would then issue the rebates to individual applicants under
Secretary of Energy.
their own procedures and timelines.
High-Efficiency Electric Home Rebates
Section 50122 of the IRA, High-Efficiency Electric Home
Martin C. Offutt, Analyst in Energy Policy
Rebate Program, authorizes SEOs to establish programs to
IF12258
provide point-of-sale rebates to eligible entities for
https://crsreports.congress.gov
The Inflation Reduction Act: Financial Incentives for Residential Energy Efficiency and Electrification Projects
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF12258 · VERSION 1 · NEW