Obstacles 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 credits for expenses 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 in his West Philadelphia home last year. Abramson, who is in charge of housing programs at the Philadelphia Energy Authority, said the $2,000 credit covered only a fraction of the roughly $10,000 cost.

This – and the fact that a tax credit, unlike a point-of-sale rebate, requires an upfront investment from the household – means that claiming the tax credits can be difficult for low-income households.

“I had to either have the $10,000 on hand or have access to credit to be able to distribute those payments,” Abramson said. “Depending on when you file your taxes, it can take a full year or more to get the money back. That in itself is a condition that only people with good capital can take advantage of.”

Joline Price, an attorney at Community Legal Services who helps low-income households deal with utility shutoffs and high bills, doesn’t see the tax breaks as a 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 earn enough to have to pay taxes, she says.

“They can barely make it through the month – if they can make it at all,” she said. “What our customers need is direct investment in repairs and energy efficiency – people who will come in and do the work on their home without having to put up capital up front.”

Abramson hopes that rebates for high-efficiency appliances provided by the Inflation Reduction Act will be more useful for households struggling with their energy bills. Pennsylvania expects to implement these rebates early next year.