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. Find additional information on how the Inflation Reduction Act benefits the State of Tennessee here.

Sign up here for the Tennessee Department of Environment and Conservation Office of Energy Program’s (TDEC OEP) email list for updates regarding the Inflation Reduction Act Rebate Programs, as well as our two monthly newsletters, which highlight timely news items, upcoming events, funding opportunities, and new resources regarding energy and energy in transportation.

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 Efficiency Rebates) and the High-Efficiency Electric Home Rebate Program (Home Electrification and Appliance Rebates). These Programs will be administered by the U.S. Department of Energy (DOE) 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. On July 27, 2023, U.S. DOE released program guidance for States to apply for the Home Energy Rebate Programs funding. TDEC OEP is designing the programs in alignment with the U.S. DOE guidance and will prepare program applications to be submitted for DOE’s review and approval.

Households looking for home energy retrofit assistance today cannot yet access these rebates but may be eligible for TVA EnergyRight Residential Energy Efficiency Rebates or currently active federal programs, including tax credits or the Weatherization Assistance Program.

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.

Home Energy Performance-Based Whole House Rebate (Home Efficiency Rebates)

Tennessee’s allocation for the Home Efficiency Rebate Program is $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 based on both income qualification as well as the amount of energy saved. 

The State must reserve portions of its rebate program funding to serve low-income, single-family households and low-income, multifamily buildings; for Tennessee, the minimum amount that must be allocated for low-income, single-family households is $20,115,057, and the minimum amount that must be allocated for low-income, multifamily buildings is $5,032,676.

Eligibility:

Any household is eligible for Home Efficiency Rebates, and rebate amounts will be determined based on energy saved and income qualification.

Single Family Household:

Multifamily Household:

*To determine the applicable area median income (AMI), please visit the Housing and Urban Development Median Income Tool.

High-Efficiency Electric Home Rebate Program (Home Electrification and Appliance Rebates)

Tennessee’s allocation to administer the Home Electrification and Appliance Rebate Program is $83,390,060. Rebates for electric appliances are set by legislation and are specifically targeted to low-income households. 

The State must reserve portions of its rebate program funding to serve low-income, single-family households and low-income, multifamily buildings; for Tennessee, the minimum amount that must be allocated for low-income, single-family households is $19,998,057, and the minimum amount that must be allocated for low-income, multifamily buildings is $5,003,404.

Appliance purchases must be carried out as part of a new construction project, to replace a non-electric appliance, or as a first-time purchase with respect to that appliance.

Eligibility:

The law specifies that Home Electrification and Appliance Rebates are available to (1) low- or moderate-income (LMI) households, (2) individuals or entities that own a multifamily building with low- or moderate-income households comprising at least 50% of the residents, and (3) governmental, commercial, or nonprofit entities that are carrying out projects for low- or moderate-income households or multifamily building owners.

A low- or moderate-income household is one where an individual or family has a total annual income less than 150% of the median income of the area where the individual or family resides. For households with a total annual income below 80% of the area median income (AMI), rebates can cover a higher percentage of the total project costs.

Rebate Limitations:

*To determine the applicable area median income (AMI), please visit the Housing and Urban Development Median Income Tool.

There is a maximum rebate of $14,000 per building, with percentage caps varying by income and building type.

Tax Credits*

Clean Vehicle Tax Credits

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 as of January 1, 2023. More details are provided in the Alternative Fuels Data Center and on the list of EVs with Final Assembly in North America.

Commercial Clean Vehicle Tax Credit

Beginning January 1, 2023, a Commercial Clean Vehicle Credit is available to businesses for the purchase of new electric vehicles (EV) and fuel cell electric vehicles (FCEV). 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.

Energy Efficient Home Improvement Credit

The Energy Efficiency Home Improvement Credit can be claimed for improvements made to a main home, where the person lives most of the time, between 2023 and 2032. The credit equals 30% of qualified expenses, including home energy audits, residential energy property expenses, and qualified energy efficiency improvements. There are limits on the allowable annual credit and on the amount of credit for certain types of qualified expenses. View the Fact Sheet released by the IRS for additional information.

Residential Clean Energy Credit

The Residential Clean Energy Credit can be claimed for improvements to a main home, where the person lives most of the time, whether they rent or own the home. The credit equals 30% of the costs of new, qualified clean energy property for a residence installed anytime between 2022 and 2033. Qualified expenses include solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells, and battery storage technology. View the Fact Sheet released by the IRS for additional information.

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 on U.S. DOE’s Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics webpage.

*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.

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 on the EPA website here.