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Here’s how the US climate act will lower household energy bills

The Democrats passed the big climate bill – the Inflation Reduction Act (IRA) – in the US Senate on Sunday, 51-50. It’s expected to pass in the House of Representatives this week, and President Joe Biden says he’ll sign it as soon as it lands on his desk. Here’s how the IRA helps homeowners achieve energy efficiency and lower their energy bills.

Rebates and tax credits are included in the IRA for homeowners who replace oil or gas-powered furnaces, boilers, water heaters, and stoves with high-efficiency electric appliances.

Electrification nonprofit Rewiring America writes in an August 5 brief, “IRA Benefits to Disadvantaged Communities”:

A household with an efficient electric heat pump for space heating and cooling, a heat pump water heater, one electric vehicle, and solar panels would save $1,800 a year today.

These savings will be reflected in lower monthly energy bills, reduced bill volatility, and a lessening of disproportionately high energy burdens within disadvantaged communities. Importantly, these savings add up — so much so that if a household invests their energy bill savings from electrifying their home appliances, these savings will grow to over $30,000 after 10 years and $140,000 after 25 years.

The $4.28 billion High-Efficiency Electric Home Rebate Program, which is baked into the IRA, will provide an upfront rebate of up to $8,000 to install heat pumps, which can both heat and cool homes. It also provides a rebate of up to $1,750 for heat-pump water heaters. (Editor’s note: We just installed an air source heat pump hot water heater in our house. It costs a miniscule $108 a year to run.)

There’s also a rebate of up to $840 to offset the cost of a heat-pump clothes dryer or an electric stove, including induction ranges.

If a home needs an electrical panel upgrade to support new electrical appliances, then there’s up to a $4,000 rebate to help with that. There’s also a rebate of up to $2,500 for electrical wiring improvements. 

And for one of the most cost-efficient and quickest ways to make a home more energy-efficient – insulation and sealing – there’s a rebate of up to $1,600. 

The IRA provides a tax credit of up to $2,000 to install heat pumps for homeowners who don’t qualify for the rebate, and installing an induction stove or new energy-efficient windows and doors qualifies for tax credits of up to $1,200 annually.

Homeowners will be able to collect a maximum of $14,000 total in rebates. Household income cannot exceed 150% of the area median income as calculated by the Department of Housing and Urban Development in order to qualify. (Here’s a handy Area Median Income Lookup Tool from Fannie Mae to see what your limit is.) It looks as though, according to the bill itself, rebates and tax credits start after December 31, 2022.

The program will be administered by states and will run through September 30, 2031.

Read more: If the big US climate bill passes, here’s how it could turbocharge solar and wind

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Avatar for Michelle Lewis Michelle Lewis

Michelle Lewis is a writer and editor on Electrek and an editor on DroneDJ, 9to5Mac, and 9to5Google. She lives in White River Junction, Vermont. She has previously worked for Fast Company, the Guardian, News Deeply, Time, and others. Message Michelle on Twitter or at Check out her personal blog.