Can You Save Money With the Inflation Reduction Act in Michigan?

Under the IRA, Michigan homeowners will have access to multiple rebate programs that help low and moderate-income households make energy-efficient HVAC systems and weatherization upgrades to save money in the long term. These programs reduce upfront labor and equipment costs.

An example is how homeowners who install electric heat pump systems, which are 30-60% more efficient and better at humidity control than traditional HVAC systems, will have lower utility bills.

The primary rebate program for the IRA is the High-Efficiency Electric Home Rebate Act (HEEHRA). Regardless of income, HEEHRA caps any heat pump installation project at $8,000 and any home improvement project at $14,000. Depending on your household income …

• It covers 100% of the heat pump installation cost for eligible households that make less than 80% of their area’s median income.
• It covers half the installation cost for households with 80-150% of the median income.

Another rebate program under the IRA is the Homeowner Managing Energy Savings (HOMES). If a contractor can prove that a heat pump installation can achieve a minimum of 20% in energy savings, a household can receive rebates of up to $8,000. Michigan homeowners can also receive larger rebates for home improvement projects that cut their energy consumption by 35% or more.

The HOMES rebate program is live as of January 2023; HEEHRA will start in late 2023. You can stack the two rebates, but not for the same project. So, for example, you could use HEEHRA to upgrade your home’s electrical panel and then HOMES for a heat pump installation.

Another program under the IRA is the 25C Non-Business Energy Property Tax Credit, which rolled out in January 2023. This tax credit allows Michigan homeowners to deduct up to 30% of the costs for any qualifying energy-efficiency project from their taxes. The maximum limit for heat pump installation deductions is $2,000 per year. Other house upgrades have a $1,200 per year cap.

Beyond high-efficiency HVAC system installations, the 25C Tax Credit provides cost-saving ways for low and moderate-income families to save money on weatherization upgrades, which will help them save money and cut energy consumption. Proper weatherization can save Michigan homeowners 20-25% on their yearly heating costs.

You can start your better weatherization journey with a home energy audit, which many utility companies provide. The 25C Tax Credit covers this home energy audit. Based on the audit results, you may receive recommendations for improving the following:

• Insulation: Optimizing your home’s insulation can give you a great Return on Investment as it means you won’t have to pay for more heating and cooling than you actually need to. Insulation can include anything from weather stripping to house wrapping, but all products and services must come with a Manufacturer's Certification Statement.
• Windows and doors: Windows and doors that hold temperature well are critical to having an energy-efficient home. The 25C Tax Credit covers up to $1,200 of the cost of swapping out exterior windows for ones that hold temperature better.
• Programmable and smart thermostats: Installing a programmable or smart thermostat can further reduce your home’s energy usage. While the 25C Tax Credit doesn’t specifically cover thermostat installation, many local utility companies in Michigan will offer incentives for this. Read our blog, “Ultimate Guide to HVAC Rebates, Tax Credits, and Incentives in Michigan” to learn more.

You also aren’t restricted to the 25C Tax Credit for weatherization. Michigan’s Weatherization Assistance Program provides wall insulation, attic insulation and ventilation, foundation insulation, air leakage reduction, and dryer venting services to low-income homeowners.