IRA Incentives

Decarbonization is going on sale

Retrofit.LA and The LA Better Buildings Challenge is working with the LA Department of Water and Power to align federal and state incentives with local rebate program requirements.

The Inflation Reduction Act of 2022 (IRA) is the most significant climate legislation in U.S. history. But what does this mean to building owners? As one White House expert recently put it, “decarbonization is going on sale.” 

Two-thirds of IRA funding will take the form of tax credits, which are being enhanced to benefit more organizations, including nonprofits and even local governments. In addition, the EPAct 179D tax deduction has been made permanent, and its value has more than doubled from $1.80 per square foot to $5.

Demystifying IRA tax incentives for building owners

Federal tax law experts Gabrielle Jacques of Norton Rose Fulbright and energy efficiency expert Rich Maiolo of Capital Review Group discuss the implications of the IRA for building owners, including: 

  • Recent changes to federal tax incentives
  • How to access these incentives; and  
  • Case studies on real-world projects 

Tax Incentives For
Building Decarbonization

Investment Tax Credit (ITC)

Allows taxpayers and certain tax-exempt entities to deduct up to 30% of the cost of renewable energy systems from their federal taxes, as long as projects meet prevailing wage and apprenticeship requirements for projects over 1 MW AC

Investment Tax Credit (ITC)

Projects eligible for the ITC may include: energy storage technologies, microgrid controllers, fuel cells, geothermal (heat pump and direct use), combined heat and power, microturbines and interconnection costs

Production Tax Credit (PTC)

Allows taxpayers and certain tax-exempt entities to deduct $0.0275/kWh (2023 value) for the cost of renewable energy systems from their federal taxes, as long as projects meet prevailing wage and apprenticeship requirements for projects over 1 MW AC

Production Tax Credits (PTC)

Projects eligible for the PTC may include: biomass, landfill gas, hydroelectric, marine and hydrokinetic

Energy Efficient Commercial Building Deduction EPAct 179D

Can be claimed by building owners who construct energy efficient buildings or increase the energy efficiency of existing buildings by at least 25%, with the opportunity for an increased deduction for those making higher efficiency improvements and meeting prevailing wage and apprenticeship requirements

Energy Efficient Commercial Building Deduction EPAct 179D

Previously capped at $1.80 per square foot, this deduction may now reach up to $5 per square foot

Multifamily rebates
grants & Tax Credits

High-Efficiency Electric Home Rebate Act (HEEHRA)

Point-of-sale consumer rebate program that covers product and installation costs to enable household electrification, HEEHRA covers 100% of electrification project costs (up to $14,000) for low-income households and 50% (up to $14,000) for moderate-income households

High-Efficiency Electric Home Rebate Act (HEEHRA)

Qualified electrification projects include: heat pump HVAC systems, heat pump water heaters, electric stoves and cooktops, heat pump clothes dryers, upgraded circuit panels, insulation, air sealing, ventilation and wiring

Green and Resilient Retrofit Program (GRRP)

Provides owners of HUD-assisted multifamily housing with capital resources to reduce carbon emissions, make utility efficiency improvements, incorporate renewable energy sources and make properties climate resilient

Green and Resilient Retrofit Program (GRRP)

Funding varies by project scope from up to $40,000 per unit ($750,000 per property) for specific retrofit measures, or “elements, to as much as $80,000 per unit ($20 million per property) for comprehensive retrofits

Energy Efficient Homes Tax Credit (45L)

The 45L tax credit provides eligible contractors up to a $5,000 tax credit for each energy efficient dwelling unit in a building up to three-stories tall and is retroactively available for projects placed into service from 2020 to 2022 and through the end of 2032

Energy Efficient Homes Tax Credit (45L)

The credit is typically best applied to the design of deep retrofits, or new builds, and can be used in combination with LADWP incentives (i.e., CAMR, CPP, etc.)

The information provided here does not constitute professional tax advice or other professional financial guidance. It should not be used as the only source of information when making decisions regarding design, purchasing, investments or tax implications of energy or other building upgrades, or when executing other binding agreements.

This page will be updated periodically, as guidance on the implications of the Inflation Reduction Act is ongoing. In the event that there is conflict between information provided on this webpage and guidance or notices published by the IRS, information published by the IRS will always take precedence.

Last updated Aug. 4, 2023

“The avoidance of taxes is the only intellectual pursuit that still carries any reward.”