Barriers for low-income households
Some of the activities and goods covered by the tax credits, such as energy audits, insulation and efficient appliances, can help lower households’ utility bills. But nationally, higher-income households disproportionately used the tax breaks for costs in 2023 (the Treasury Department did not release income data for tax credit users by state).
Alon Abramson claimed one of the tax credits after installing an electric heat pump system in his West Philly home last year. Abramson, who oversees residential programs at the Philadelphia Energy Authority, said the $2,000 credit only covered a fraction of the roughly $10,000 cost.
This — and the fact that a tax credit, as opposed to a point-of-sale rebate, requires a household to make an investment up-front — means the tax credits can be challenging for low-income households to use.
“I needed to have either the $10,000 on hand or access to credit to be able to spread those payments out,” Abramson said. “That could be a whole year or more, depending on when you file your taxes, before you see that money returned to you. That in itself is really a condition that only folks with a good amount of capital can take advantage of.”
Joline Price, an attorney at Community Legal Services who helps low-income households navigate utility shutoffs and high bills, does not see the tax breaks as the solution for her clients — even though home improvements like insulation or new windows could often help lower their bills. Many of her clients don’t make enough to be required to file taxes, she said.
“They’re barely making it work — if they’re even making it work — to get through the month,” she said. “What our clients need are direct investments in repairs and energy efficiency — people coming to do the work on their home without having to put up any up-front capital.”
Abramson hopes that point-of-sale rebates for high-efficiency electric home appliances through the Inflation Reduction Act will be more useful for households struggling with energy bills. Pennsylvania expects to roll these rebates out early next year.
