2025 Solar & Energy Rebates: What Homeowners Need to Know

President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022. This legislation is designed, in part, to invest in clean energy production in the United States and support consumer initiatives that reduce carbon emissions.

How does this impact you? — By investing in select energy upgrades, you can take advantage of valuable financial incentives.

The Inflation Reduction Act provides tax credits and rebates for green home and vehicle upgrades, benefiting individuals, corporations, and state and local governments. A total of $43 billion has been allocated for tax credits, making solar, battery storage, energy-efficient appliances, geothermal heating, and electric vehicles more affordable.

While we won’t cover all 272 pages of the legislation (which also lowers healthcare costs, funds the IRS, and improves taxpayer compliance), we will highlight opportunities for homeowners to save money through solar and other home energy-related upgrades.

In this article, the acronym IRA will refer to the Inflation Reduction Act.

Solar Incentives

The Residential Clean Energy Credit within the IRA extends the timeline of the Solar Investment Tax Credit (ITC) and increases the credit amount as well. 

Originally, the ITC was set to drop from 26% in 2022 to 22% in 2023, but under the IRA, it has been raised to 30% through 2032. This increase is also retroactive to January 1, 2022, meaning homeowners who installed solar panels in 2022 still qualify for the full 30% credit.

How the Solar Tax Credit Works

• The credit applies to taxes owed for the year, meaning it cannot be used at the point of sale or redeemed as a check.
• Unused credits roll over to the following tax year as long as the credit is active.
• The 30% credit applies to the total system cost, including equipment, permitting, and installation.
• It also covers solar batteries and DIY solar systems, such as SunPower’s IKEA solar suite available to California residents.

Additional Home Energy Upgrades

Energy Efficient Home Improvement Credit 

The Energy Efficient Home Improvement Credit expands on a previous homeowner tax credit by increasing the percentage covered and making it an annual credit instead of a one-time lifetime credit.

Eligible Upgrades:

• Heat pump HVACs
• Heat pump water heaters
• Doors
• Windows
• Insulation
• Breaker boxes

The credit is capped at $1,200 per household per year, except for heat pump water heaters, which qualify for up to $2,000.

HEEHRA (High-Efficiency Electric Home Rebate Program)

Unlike the tax credit, the High-Efficiency Electric Home Rebate Program (HEEHRA) rebate is applied at the point of sale, reducing the upfront cost of electrification upgrades.

The HEEHRA provides rebates for the several home improvements, listed below, along with their corresponding maximum amounts. Be aware that the maximum amount listed applies to households making less than 150 percent of their Area Medium Income (AMI). 

• Heat pump for space heating and cooling: $8,000
• Heat pump water heater: $1,750 
• Heat pump clothes dryer: $840
• Electric stove, cooktop, range, or oven: $840
• Upgraded breaker box: $4,000
• Upgraded electrical wiring: $2,500
• Insulation, ventilation, and sealing: $1,600

Who Qualifies?

• Low-income households (below 80% of Area Median Income – AMI): Rebates cover 100% of costs.
• Moderate-income households (80%–150% of AMI): Rebates cover 50% of costs.

HER (Home Efficiency Rebates; Formerly HOMES) Rebate Program

The HER (formerly HOMES) rebate program provides state-level funding to reward homeowners for reducing energy usage. This program cannot be combined with HEEHRA, but it’s an option for homeowners who don’t qualify for HEEHRA or prefer an alternative incentive.

Rebate Amounts:

• All homeowners who reduce energy usage by 35% or more can get up to $4,000 in rebates.
• Low- and middle-income households can qualify for up to $8,000 in rebates.

Planning Your Purchases

Check Rebate Availability Before Buying

The HEEHRA and HER (formerly HOMES) rebate programs are rolling out at different times depending on the state, with most expected to launch later in 2025 or early 2026. Since rebates are generally not retroactive, check with your state’s energy office before making qualifying purchases to ensure eligibility.

Take Advantage of Tax Credits Now

While waiting for rebates, you can still benefit from federal tax credits available through 2032. The Energy Efficient Home Improvement Credit offers up to $3,200 annually for qualified home upgrades, helping offset costs for projects like heat pumps, insulation, and electrical upgrades.

Consider Solar Sooner Rather Than Later

The solar tax credit applies in the tax year your system is installed and operational, making any project completed before 2033 eligible for the 30% incentive. With inflation and supply chain issues affecting prices, acting sooner allows you to start saving on energy costs immediately and maximize your return on investment.