How to decarbonize your home, with help from the Inflation Reduction Act

Ben Butterworth, senior manager for Climate and Energy Analysis at Acadia Center, and his wife, Olivia Cerf, installed heat pumps at their Melrose home.Erin Clark/Globe Staff

INTO THE RED: Climate and the fight of our lives

Looking to cut your home’s planet-warming pollution? The Inflation Reduction Act, which President Biden signed last week, could make that more affordable.

Decarbonizing your home can be expensive, but you don’t have to do it all at once, and government incentives can help. Massachusetts offers substantial rebates, especially for low-income people, through the Mass Save program.

And new federal incentives are on the way, which brings us to the Inflation Reduction Act. Here’s how to take full advantage of what it has to offer.

Rebates for lower-income people

The new federal law includes a home rebate program that can help middle- and low-income Americans afford energy-efficient appliances like heat pumps and induction stoves and other upgrades like air sealing and insulation.

These rebates are also available to landlords and businesses, governments, or nonprofits carrying out projects on behalf of low- and moderate-income tenants. They will be available at the point of sale, so you won’t have to wait months to get money back.

If your household income is less than 80 percent of your area’s median income — in Boston, a single person earning $78,550 or less would qualify, or a couple making a combined $89,750 or less — you can claim a rebate for 100 percent of the cost of the upgrades, up to a $14,000 cap. Households that make between 80 and 150 percent of their area’s median income are eligible for rebates of half their cost, up to $14,000.

There are overall caps for each upgrade — $8,000 for a heat pump, for instance.

It’s not clear yet when the incentives will become available. They will be administered by state governments, which need to get their plans approved by the federal government. Sam Calisch, of the nonprofit Rewiring America, who helped draft the bill language, said he expects that will happen sometime next year.

The law doesn’t specifically say whether the program will apply retroactively to upgrades made in 2022 — but advocates say they don’t think it’s likely.

Tax credits, too

Higher-income households can also get money back for appliances and other upgrades through federal tax credits.

The Inflation Reduction Act creates a new and improved version of a program that expired last year. It’s available for all of 2022 — including retroactively — and will stay in place until 2033.

This year, you can get a tax credit for 10 percent of the cost of appliances and upgrades, such as efficient water heaters, heat pumps, central air conditioning, furnaces, and hot water boilers, as well as other upgrades like insulation and efficient windows and doors. There are caps on how much you can receive for each upgrade and a total program-wide limit of $500.

But to save even more, wait a few months.

Starting on Jan. 1, 2023, you can get back 30 percent of the cost of eligible home improvements. And the credit will be expanded to cover energy audits and electrical panel upgrades.

There will be caps for each kind of project — $600 for most appliances — and an overall annual limit of $1,200 total. That overall cap doesn’t include heat pumps and heat pump water heaters, though. On those, you can get back 30 percent of the cost of buying and installing the appliance, with an annual limit of $2,000, or half the total cost of a project, whichever is less.

With tax credits, the amount of money you can receive depends on your tax burden. So, if an upgrade is eligible for up to $2,000 in credits, you must owe that amount or more to receive the full incentive amount.

Theoretically, these incentives can stack, meaning, for example, income-qualified people could get a rebate of up to $8,000 for heat pumps and up to $2,000 in tax credits for them.

“Nothing in the law rules that out,” said Lisa Frank, executive director of the Washington legislative office for the nonprofit Environment America.

But Calisch said that in practice, if you qualify for the home rebate program, your income is likely low enough that you have a small tax liability, so you probably can’t get much back in credits.

Another tax credit program extended by the inflation act, previously scheduled to expire in 2024, will, starting next year, allow homeowners to deduct up to 30 percent of the cost of transitioning to renewable heat and energy, including rooftop solar, geothermal heat pumps, and, for the first time, battery storage. That falls to 26 percent in 2033 and 22 percent in 2034.

These credits, too, can be applied retroactively for 2022.

Renters, apartment dwellers, and others who can’t install renewables can use the credit to enroll in certain community solar projects.

And there’s more. . .

The inflation act includes an additional rebate program that could save you money on appliances, too. But buckle up, because it’s complicated.

The HOMES rebate is designed for comprehensive home retrofits — multistep plans to refurbish homes with the goal of cutting energy usage, which can include insulating, replacing appliances, and making other upgrades. The amount you can save is based on the amount of energy your upgrades save overall.

For single family homes, cutting 15 to 20 percent of energy use in a retrofit can earn you money per kilowatt hour of energy saved, up to $2,000 or 50 percent of the project cost — whichever is less. By cutting energy use by more than 35 percent, you can get up to $4,000.

There’s no income requirement for these rebates, but for low- and moderate-income households, the caps go up to $8,000.

There are also rebates for multifamily homes and landlords.

You can’t get a rebate through HOMES and another federal grant or rebate for the same upgrade. So if you use this program to cut the cost of, say, a heat pump, you can’t also apply for the up-to-$8,000 credit.

States are administering this rebate program, too. It’s expected to be phased in next year, and it’s not expected to apply retroactively.

Bottom line, how much can I save?

Rewiring America created a calculator on its website, rewiringamerica.org, to help you find out.

What about state rebates?

Massachusetts also offers rebates for homeowners and renters through the Mass Save program. Savings are especially high for low-income residents, who can have the state program cover 100 percent of the cost of all qualifying upgrades, but even well-off state residents qualify for some savings, including $10,000 on a heat pump if it completely replaces fossil fuels.

It’s not guaranteed that you can get both federal and state money for the same project — but the inflation act doesn’t rule it out.

You can use the state rebates for appliances including heat pumps, washers, and, as of this month, induction stoves, as well as other measures like energy-saving lighting.

To see what savings you qualify for, check out the Mass Save website.

Where to start?

To begin, consider getting a home energy audit — an assessment of your energy consumption. It’s free through the state’s Mass Save program and also covered by new federal tax incentives. Then seal and insulate your home to reduce the amount of energy it takes to heat and cool it, said Ben Butterworth, senior manager of climate and energy analysis at the Acadia Center, a clean energy advocacy organization.

Globe Staff

Check your home heating equipment and appliances. Theoretically, if you’re trying to cut as much carbon as possible, a good rule of thumb is to prioritize removing your home’s biggest greenhouse gas polluters first and work from there — space heating, then water heating, and then appliances like stoves and dryers, said Butterworth. But most people find it more practical to make upgrades as old equipment wears out.

“If your furnace is 20 years old, then you need a plan for what you do when that furnace dies,” said Butterworth.

As you develop your plan, find out whether you’ll need to upgrade your electric panel to accommodate more electricity.

While you’re at it, you might consider switching to renewable energy, for instance by adding rooftop solar. Contractors can help determine how big a system you’ll need based on your energy usage. If rooftop solar isn’t an option for you, you might think about subscribing to a community solar farm or enrolling in a 100 percent renewable plan with your utility.

These steps can help you not only cut carbon pollution, but also lower your utility bills and improve your indoor air quality.

Correction: This story has been updated to note that users of the HOMES rebate can receive up to $2,000, or 50 percent of the project cost, for retrofits that cut energy use by 15 to 20 percent. It has also been updated to clarify that Rewiring America expects only certain qualifying community solar projects will be eligible for the home clean energy credit.