The recently passed Inflation Reduction Act (IRA) offers numerous incentives and opportunities for funding for a variety of clean energy and energy efficiency initiatives, ranging from tax credits for electric vehicles to grants for home electrification retrofits. These funding options are stackable with incentives and programs offered by the New Jersey Clean Energy Program. More information on the Clean Energy Program can be found on this website.

 

Some of the funding opportunities within the IRA related to clean energy include:

 

Residential Buildings

 

Home Energy Performance-Based, Whole-House Rebates (HOMES)

• Under this program, grants are provided to state energy offices for the purposes of developing a whole-house energy saving retrofits rebate program. Rebates vary based on income-level, home type, and energy savings.
• Eligible Recipients of state rebates:
  • Homeowners
  • Aggregators
• Eligible uses:
  • Purchasing eligible equipment that significantly reduces energy consumption in a home or multi-family building
• Rebate levels:
  • Income is 80% Area Median Income or higher = 50% of cost
  • Income is 80% Area Median Income or lower = 80% of cost
• See the chart below for further details

 

High-Efficiency Electric Home Rebate (HEEHR)

• Program that supplies state energy offices grants to implement a program designed to offer rebates to residents for high-efficiency electric home upgrades. Rebates are dependent on income level and equipment price
• Eligible Uses
  • Purchase of eligible high-efficiency electric home appliances
• Rebate amounts:
  • Single Family Home – 80%-150% of Area Median Income = 50% of project costs
  • Single Family Home – Less than 80% of Area Median Income = 100% of project costs
  • Multifamily Building – 80%-150% of Area Median Income = $2,000/unit ($200,000 max)
  • Multifamily Building – Less than 80% of Area Median Income = Lesser of $4,000/unit or 80% of project costs

• See the chart below for further details

   

  Program	Energy Savings	Rebate Amount and Caps
  		Single Family	Single Family LMI	Multifamily Family	Multifamily Family LMI
  Home Energy Performance-Based Rebates, Whole-House Rebates (HOMES)	20-34% modeled savings	Lesser of $2,000 or 50% of project costs	Lesser of $4,000 or 80% of project costs	$2,000 per dwelling unit, maximum $200,000 per building	Lesser of $4,000 dwelling unit or 80% of project costs
  	35% or more modeled savings	Lesser of $4,000 or 50% of project costs	Lesser of $8,000 or 80% of project costs	$4,000 per dwelling unit, maximum $400,000 per building	Lesser of $8,000 dwelling unit or 80% of project costs
  	15% or more measured savings	Payment per kilowatt hour or kilowatt hour equivalent saved that is equal to $2,000 for a 20% reduction of energy use for average home in the state or 50% of project costs	Payment per kilowatt hour or kilowatt hour equivalent saved that is equal to $4,000 for a 20% reduction of energy use for average home in the state or 80% of project costs	Payment per kilowatt hour or kilowatt hour equivalent saved that is equal to $2,000 for a 20% reduction of energy use per dwelling unit for the average multifamily	Payment per kilowatt hour or kilowatt hour equivalent saved that is equal to $4,000 for a 20% reduction of energy use per dwelling unit for the average multifamily building in the state or 80% of project costs
  Home Efficiency Electric Home Rebate (HEEHR)		80-150% area median income: 50% of project costs	Less than 80% area median income: 100% of project costs	80-150% area median income: 50% of project costs	Less than 80% area median income: 100% of project costs

 

Energy Efficient Home Improvement Credit

• Provides a tax credit for energy-efficiency improvements of residential homes
•  Credit:
  • Credit amounts to 30% of cost, with limits for type of improvement and yearly total
  • Credit capped at $1,200 annually
    • $2,000 annually for heat pumps
• Eligible Recipients:
  • Homeowners
  • Renters (for certain improvements)

• See the chart below for further details

   

  Equipment Type	Tax Credit Available for 2023-2032 Tax Years
  Home Clean Electricity Products
  Solar (electricity)	30% of cost
  Fuel Cells
  Wind Turbine
  Battery Storage	30% of cost
  Heating, Cooling, and Water Heating
  Heat pumps	30% of cost, up to $2,000 per year
  Heat pump water heaters
  Biomass stoves
  Geothermal heat pumps	30% of cost
  Solar (water heating)
  Efficient air conditioners	30% of cost, up to $600 - cap of $1,200 per year
  Efficient heating equipment
  Efficient water heating equipment	30% of cost, up to $600 - cap of $1,200 per year
  Other Energy Efficiency Upgrades
  Electric panel or circuit upgrades for new electric equipment	30% of cost, up to $600 - cap of $1,200 per year
  Insulation materials	30% of cost - cap of  $1,200 per year
  Windows, including skylights	30% of cost, up to $600 - cap of $1,200 per year
  Exterior doors	30% of cost, up to $500 for doors (up to $250/door)
  Home Energy Audits	30% of cost, up to $150 - cap of $1,200 per year
  Home Electric Vehicle Charger	30% of cost, up to $1,000 per year (Further information on eligibility requirements pending)

 

Residential Clean Energy Credit

• Provides a tax credit for the purchase of residential clean energy equipment, including battery storage with capacity of at least 3 kWh
• Base Credit Amount:
  • 30% of cost of equipment through 2032 (rates begin to decrease during the phase-down periods of 2033 and 2034)
• Eligible Recipients:
  • Homeowners
  • Renters

 

New Energy Efficient Homes Credit

• Provides a tax credit for construction of new energy efficient homes
• Credit Amounts
  • $2500 for new homes meeting Energy Star standards
  • $5000 for certified zero-energy ready homes
  • Multifamily Homes
    • $500 base amount per unit for Energy Star
    • $1000/unit for zero-energy ready
    • Bonus credit available for MFH – 5x the base amount if prevailing wage requirements are met.
• Eligible Recipients:
  • Homebuilders

 

Commercial and Industrial Buildings

 

179D Commercial Buildings Energy-Efficiency Tax Deduction

• Provides a tax deduction for energy efficiency improvements to commercial buildings, including improvements to:
  • Interior lighting
  • Heating, cooling, ventilation, and hot water
  • Building envelope.
• Credit Amounts
  • Base credit based on square footage and dependent on efficiency increases
  • Bonus credit available
    • Based on projects meeting prevailing wage and registered apprenticeship requirements
• Eligible Recipients:
  • Owners and long-term lessees of commercial buildings.
  • Designers of energy efficient building property (architects, engineers).
  • Tax-exempt owners of commercial properties, pending Treasury guidance on deduction allocation

 

Green and Resilient Retrofit Program – Grants and Loans

• Grants and loans to HUD-assisted properties to improve energy or water efficiency; enhance indoor air quality or sustainability; implement the use of zero-emission electricity generation, low-emission buildings materials or processes, energy storage, or building electrification strategies; or make the properties more resilient to climate impacts.
• Eligible Recipients: (see IRA Guidebook)
• Eligible Uses:
  • to fund projects at an eligible property that
    • improve energy or water efficiency
    • enhance indoor air quality or sustainability
    • implement the use of zero-emission electricity generation
    • low-emission building materials or processes
    • energy storage
    • or building electrification strategies;
    • or address climate resilience

 

Green and Resilient Retrofit Program – Benchmarking

• To conduct energy and water benchmarking of HUD-assisted properties, provide associated data analysis and evaluation at the property and portfolio level, and develop information technology systems necessary for the collection, evaluation, and analysis of such data
• Funding mechanism: Federally-funded third party contract support
• Eligible Recipients: (See IRA Guidebook)
• Eligible Uses:
  • Energy and water benchmarking, along with associated data analysis and evaluation at the property and portfolio level, and
  • The development of information technology systems necessary for the collection, evaluation, and analysis of such data.

 

Clean Vehicle Incentives

 

Clean Vehicle Credit

• Tax credit for purchasers of clean vehicles
• Not available for those with the following adjusted gross income or above:
  • $300,000 – couples
  • $225,000 – heads of household
  • $150,000 – singles
• Bonus credit amount = $3,750 credit for vehicles meeting critical minerals requirement; $3,750 for meeting certain requirements for battery manufacturing

 

Credit for Previously-Owned Clean Vehicles

• Tax credit for purchasers of pre-owned clean vehicles
• Base credit: The lesser of $4,000 or 30% of the sale price
• Criteria
  • No available for those with the following adjusted gross income or above:
    • $150,000 (couples)
    • $112,500 (heads of household)
    • $75,000 (singles)
  • Individuals can claim only once every three years
  • Vehicles must be sold by a dealer
  • Sale price must be $25,000 or less
  • Can only be claimed once per vehicle

 

Credit for Qualified Commercial Clean Vehicles

• Tax credit for purchasers of qualified commercial clean vehicles
• Available for vehicles placed in service after 1/1/23 and acquired before 1/1/33
• Eligible recipients: Businesses that acquire motor vehicles or mobile machinery for use or lease; tax-exempt entities that acquire them for use
• Base credit amount: Lesser of
  • 15% of the vehicle’s basis or 30% for vehicles without internal combustion engines; OR
  • The amount the purchase price exceeds the price of a comparable internal combustion vehicle
  • Credit is capped at $7,500 for vehicles <14,000 lbs and $40,000 for all other clean vehicles

 

More information on these incentives are included in the IRA Guidebook, which can be found here.