Treasury: New Energy Credits ‘More Popular’ Than Expected

Ahead of the two-year anniversary of the enactment of the Inflation Reduction Act (PL 117-169), the Treasury Department shared data from 2023 tax returns indicating that the bill’s green energy tax incentives are reducing costs of clean energy upgrades and energy efficiency investments. (IR 2024-202, 8/7/2024)

According to IRS data and an analysis from the Treasury Office of Economic Policy released August 7, in 2023 “3.4 million American families benefitted from $8.4 billion in tax credits” created or expanded under the Inflation Reduction Act.

In 2023, over 1.2 million taxpayers “claimed more than $6 billion in credits for residential clean energy investments like solar electricity generation, solar water heating, and battery storage,” Deputy Treasury Secretary Wally Adeyemo told reporters August 6, saving households $5,000 on average. “Families also claimed more than $2 billion for energy-efficient home improvements including heat pumps, efficient air conditioners, ventilation, windows, and doors in households across the country.” Those improvements saved an average $800.

The data reflects returns filed and processed through May 23, but Adeyemo said these figures are expected to be revised upwards as more 2023 returns are processed. “But even these initial counts are significantly higher than in 2021, the last year before the inflation bill was enacted,” he added. Since the bill’s passage, the total number of households benefitting from the credits increased by almost a third and the value of the credits increased by almost two thirds, according to the deputy secretary.

These statistics are “significant” and “show that these credits are more popular than initially projected,” Adeyemo said. Treasury also boasted that almost half of combined Residential Clean Energy Credit and Energy Efficient Home Improvement Credit claims came from households with incomes under $100,000.

Solar electricity investments accounted for the most Residential Clean Energy Credit claims, read a Treasury report by Deputy Assistant Secretary for Microeconomic Policy Laura Feiveson and Research Economist Matthew Ashenfarb of the Office of Climate and Energy Economics. “In total, more than 750,000 families reporting a total of more than $20.5 billion in qualified solar electric property costs in 2023,” they reported. Treasury claimed that the median savings attributable to solar installations is $2,230 per year, citing research conducted in 2021 that sampled 500,000 households.

Claims from investments in electric or natural gas heat pumps were made by over 250,000 households, in addition to the 100,000 that claimed heat pump water heater investments and the 700,000 for insulation and air sealing upgrades, the report found.

“The Biden-Harris Administration’s top economic priority is lowering costs for American families, and the Inflation Reduction Act is advancing that goal by making home energy upgrades more affordable and cutting monthly utility bills,” said Treasury Secretary Janet Yellen in a press release. She said the law will save taxpayers “hundreds, if not thousands, of dollars annually on their utility bills for many years to come.”