Inflation Reduction Act/HEEHRA for a heat pump water heater

October 9, 2023 10:16 AM

I live in the USA. My (gas) water heater is nearing end-of-life, and I'm looking at a heat-pump system as its replacement. As I understand it, there's a lot in the Inflation Reduction Act that can provide incentives to this purchase, and I'm trying to figure out how it all fits together, vis-a-vis tax credits, point-of-sale rebates, and local and state administered incentives.

When I first read about it, I got the impression IRA energy-efficiency incentives were meant to be administered on the state level, but I'm not sure if that's true any more. The credits I entirely understand are the 30% (with a $2000 cap) tax credit on this installation, which is a straightforward claimed credit on federal taxes for the year of installation. If I need breaker-box modification for that project (plausible, since it'd be a change from gas to electric), there's a 30% credit for that too, up to $600. What I'm less clear on is HEEHRA and any aspects of home-efficient credits mandated on the sub-national level. I'm specifically confused about implementation-level details of HEEHRA.

HEEHRA eligibility is, as I understand it, dictated by household income, with households at less than 80% of the area median income receiving a 100% rebate and between 80% and 150% of the area median income receiving a 50% rebate. One big question I have is how this term is defined and when it is calculated. In particular, from a gaming-the-system perspective, do contributions to tax-deferred retirement plans, which reduces AGI, affect this calculation? I think I'm near the edge of a boundary with my current take-home pay; could increased contribution to a retirement plan be used to move my household into a rebate-eligible range? If that was feasible, would it be done in the tax year before the purchase, or what? Also, if the rebates are provided at point-of-sale, what's the verification procedure for any of this? A lot of sources suggest implementation of HEEHRA is on a state-by-state level, and I live in Kentucky, which doesn't have a lot of local information; should I be waiting for implementation details to come from my state legislatures and/or the Kentucky Energy and Environment Cabinet?

posted by jackbishop to Law & Government (2 answers total)

Not an expert, not a Kentucky person, just a regular consumer. I am not sure how much general answers will help you, but I think the DSIRE program listing can be a good place to start. Your utility companies would be also be a good resource for answers.

In my non-Kentucky area, some programs are administered through utility companies, some through an alliance formed by the utility companies, some through an approved list of appliance vendors, and some through an approved list of contractors. It can totally be frustrating and difficult to navigate!

Also in my non-Kentucky area, most income tests use the HUD guidelines which have very few deductions that don't include retirement savings.
posted by Gable Oak at 12:39 PM on October 9, 2023

If you have a local plumbing supplier that answers their phone or email, they already know about a lot of these rebates/credits/incentives already, and can talk you through a lot of them.

That's what I did in Oregon, then I bought an approved Rheem heat pump water heater from Home Depot like a barbarian.
posted by ivan ivanych samovar at 5:01 PM on October 10, 2023