What you need to know about the IRA: Tax credit vs Rebate

The Inflation Reduction Act calls out both tax credits and rebates. What’s the difference?

A tax credit is a dollar-for-dollar reduction in the amount of income tax you would otherwise owe. You claim a tax credit as part of your annual tax return. So, if you make a purchase in 2023, you will claim the tax credit on your 2023 tax return which you would file in 2024. 

You must have a tax appetite to take advantage of the tax credit. This means, your taxable income is equal to or more than the amount of the tax credit. 

Your taxable income is your gross earnings (money, property, or services you earn through work, investments, and other means) minus available deductions and exemptions.  

A rebate is an upfront discount that gives you cash back after you make a purchase, and typically more quickly than a tax credit. A point-of-sale rebate gives you that cash back when you make the purchase, effectively reducing the cost of the item purchased. Rebates may include income ranges to determine eligibility.

Depending upon your eligibility for each, you can, in some circumstances, claim both. 

Find out how much money you could get from rebates and tax credits with Rewiring America's Savings Calculator.

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Find out how much money you could get from rebates and tax credits with Rewiring America's Savings Calculator.

Please note: We're sharing resources to assist Minnesotans who are seeking information about federal funding opportunities. These resources are based on preliminary information released by the federal government. Program information may change as more guidance is provided by federal and state governments. For specific information on federal funding, please visit the relevant U.S. Government websites.