Combining Federal and State Incentives
- Federal Home Energy Rebates and Tax Credits: Homeowners can receive rebates through federal programs such as the DOE’s Home Efficiency Rebates and Home Electrification and Appliance Rebates (part of the Inflation Reduction Act – IRA) and also claim federal tax credits like the 25C energy efficient home improvement credit. The 25C tax credit can be claimed on the cost after the rebate is applied, so the rebate effectively reduces your tax credit basis but you can still benefit from both.
- Restrictions on Combining Federal Grants/Rebates: You cannot combine multiple federal grants or rebates for the same single upgrade. For instance, you cannot use two federal rebates for the same HVAC upgrade. However, different upgrades on the same property can be funded by different federal grants or rebates if separated properly.
- State and Local Rebates: State-specific rebates or utility incentives are typically allowed to be combined with federal tax credits and rebates, as long as the state’s program does not impose additional restrictions. These non-federal funds can help cover remaining costs after federal incentives have been applied.
- Federal Loans and Financing: Federal loans (such as those from HUD or the Energy Efficiency Revolving Loan Fund) can be used alongside federal rebates and tax credits to finance remaining upgrade costs, providing additional stacking opportunities.
Key Points to Consider
- A federal rebate and tax credit combined cannot exceed the total cost of the improvement project.
- For federal tax credits like the 25C credit, the credit is calculated based on the adjusted cost after subtracting any federal rebate amounts received.
- State and local programs vary widely, so you should verify specific state requirements or limitations for combining federal and state incentives.
- Households with lower incomes may qualify for larger rebates under federal programs, and there may be special stacking rules for low-to-moderate income thresholds.
Practical Example
A homeowner could receive a DOE Home Efficiency Rebate of $2,000 for a heat pump installation and then claim a 25C tax credit on the reduced price (cost minus $2,000 rebate). In addition, if their state or utility offers a rebate on heat pumps, they may receive that rebate too, further lowering their upfront costs.
Summary Table of Stacking Federal and State Incentives
| Incentive Type | Can It Be Combined? | Notes |
|---|---|---|
| Federal rebate + Federal rebate | No (for same upgrade) | Different upgrades can be separately funded |
| Federal rebate + Federal tax credit (25C) | Yes, tax credit on cost after rebate | Credit basis reduced by rebate amount |
| Federal rebate + State rebate | Usually yes | Check state-specific rules |
| Federal tax credit + State rebate | Yes | Often allowed, subject to state requirements |
| Federal loans + Rebates/credits | Yes | Loans can cover remaining costs after rebates and credits |
In conclusion, you can combine federal incentives with state-specific rebates for energy-efficient upgrades, provided you follow the rules about not overlapping federal grants or rebates on the same upgrade and comply with state program restrictions. Utilizing both can significantly reduce your out-of-pocket costs for energy efficiency improvements.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/can-i-combine-federal-incentives-with-state-specific-rebates-for-energy-efficient-upgrades/
