What Trump Means for the Future of Heat Pump and EV Incentives

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(Bloomberg) — If you’ve been thinking about purchasing an electric vehicle or an energy-efficient heat pump that qualifies for federal tax credits and rebates, now may be the time.

President-elect Donald Trump called the US Inflation Act a “new green scam.” He pledged to defund the 2022 climate law signed by the Biden administration, which includes more than $8.5 billion in incentives for individuals and families to decarbonize their lives.

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“Recovering the money that has already been dispersed will be difficult, but that doesn’t mean the Trump administration won’t try,” said Romany Webb, deputy director of the Sabin Center for Climate Change Law at Columbia University. “From a purely legal perspective, there may be more avenues for the administration to withhold funds that have not yet been awarded.”

“Failure to go ahead with the announced awards may be politically unpopular,” she added.

The benefits of an IRA are multiple. The law provides up to $14,000 to low- and moderate-income households to install heat pumps, induction stoves and other high-efficiency electrical appliances. Wealthier families can get a $2,000 federal tax credit for replacing a fossil fuel furnace or water heater with a heat pump. Some electric vehicles are eligible for a $7,500 tax credit issued at the time of purchase, and a 30% tax credit is available to homeowners to install solar panels and battery storage systems.

U.S. Rep. Ro Khanna, a Democrat from California, said on the Zero podcast on Thursday that he doubts the new Trump administration and Republicans in Congress will seek blanket repeal of the IRA, given the billions of dollars in benefits it provides to their constituents.

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IRA funding is distributed across states through U.S. Department of Energy-approved rebate programs. The federal government paid $1.4 billion to nine states and the District of Columbia that began offering up to $8,000 for heat pumps and $1,750 for heat pump water heaters. They also offer $840 cash back on induction cooktops and heat pump clothes dryers and $4,000 in electrical system upgrades.

Another 10 states received $1.2 billion, but have not yet begun issuing rebates. Nine other states are awaiting federal review of their applications, which typically takes about 60 to 90 days. The rest of the states are still preparing their applications, except for South Dakota, which is not participating in the program. Florida initially rejected $175 million in funding, but has now applied.

However, if the IRA is not repealed, depriving taxpayers of those lucrative incentives would be legally difficult and politically problematic, according to David Friedman, senior policy director at Rewiring America, a nonprofit that advocates for community electrification.

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“The law is very clear that once these funds are approved, these funds must be spent,” said Friedman, a former acting assistant secretary for energy efficiency and renewable energy at the Department of Energy. “Politically, it would just be a terrible move to roll back these things as every state and territory except one has applied for these cuts.”

The $7,500 tax credit is more at risk because it could be subject to a law that allows Congress to review and repeal recently enacted regulations, according to a September paper by Webb and her colleagues.

“If we end up with a Republican-controlled Congress, there may be attempts to repeal or revise the IRA tax credits themselves,” Webb said.

This can also be politically risky. For example, the 30% tax break for residential solar installations dates back to 2006 and was set to expire in 2023 before the IRA extended it until 2032. Homeowners demanded $6 billion in tax breaks for solar and storage installations Batteries last year.

Now is always a good time for families to tap into IRAs and go electric, Friedman said. “No matter what happens in the future, you have to do it today because it is great.”

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