Tax Credits, Utility Rebates, and Mortgage Points: Reduce Your Total Cost of Capital on a New Build

Building a home isn’t just a construction project—it’s a finance project with a lot of moving parts. If you treat tax credits, utility rebates, and mortgage points as part of your capital stack rather than a nice-to-have afterthought, you can shave tens of thousands off your total cost of capital and improve cash flow from day one. I’ll walk you through where the real money is, how to stack incentives without stepping on landmines, and the best ways to structure your loan so you’re not overpaying for money.

What “total cost of capital” means on a new build

When I sit down with clients at the start of a custom build, we map out a simple pie chart that answers one question: where is your money tied up, and what is it costing you?

You’ll usually see these slices:

• Construction loan interest during the build
• Permanent mortgage interest (and points)
• Cash to close (down payment, closing costs, prepaid items, permit fees)
• Energy and operating costs (your monthly utility bill behaves like a hidden interest payment on inefficient design)
• Opportunity cost of cash used vs. invested elsewhere
• Offsets: tax credits, utility rebates, builder incentives, and valuation impacts

Your goal is to minimize the blended cost of all this money over the time you actually expect to hold the home. The core levers:

• Tax credits that directly reduce your tax liability (often dollar-for-dollar)
• Utility and state rebates that offset equipment and program costs
• Mortgage pricing strategies (points, buydowns, ARMs) that match your likely refinance or hold timeline
• Design choices that slash operating costs and qualify your project for bigger incentives

The magic happens when you coordinate these pieces early. Many incentives require pre-approval, specific equipment performance thresholds, or third-party verification. Get those wrong and you’ll leave money on the table—or worse, build yourself out of eligibility.

Quick map: who gets what

This is where people get tripped up. Incentives land in different pockets depending on who owns the home at the moment of “placing the property in service” and who certifies the performance.

• Federal builder credit (Section 45L): Claimed by the builder/developer, not the buyer. It’s worth asking the builder if they participate and whether they’ll pass savings through.
• Federal homeowner credits (Section 25D): Solar PV, battery storage, geothermal—these are homeowner credits available on a new build if you place them in service after you own the home.
• Federal homeowner credits for efficient equipment (Section 25C): Generally for improvements to an existing home, not new construction.
• State/local/utility rebates: Some go to the builder (new construction programs), some to the homeowner (equipment rebates). Many require pre-enrollment.
• Energy-efficient mortgages (EEM, HomeStyle Energy): Financing features that can increase your budget for energy upgrades or improve pricing if you meet criteria.

I’ll unpack each category and show you how to stack them without conflict.

Federal credits most new-build owners can actually claim

Section 25D: Residential Clean Energy Credit (the big one for homeowners)

This is the backbone for clean energy on new construction. If you install qualifying systems after you own the home and place them in service, you can claim:

• 30% credit (through 2032) of total installed cost for:
• Solar PV (modules, inverters, racking, balance-of-system, labor)
• Battery storage systems ≥ 3 kWh
• Geothermal heat pumps (ground-source)
• Solar water heating that meets SRCC certification
• Small wind and fuel cells (rare in residential)
• Step down: 26% in 2033, 22% in 2034, then sunsets unless extended
• No annual cap, and unused credits can carry forward

What counts as cost? Equipment, labor, permitting, wiring, trenching, and sometimes related structural work. If the battery is installed later, it can still qualify on its own as long as it meets the capacity requirement.

Where people go wrong:

• Trying to claim 25D on air-source heat pumps or heat pump water heaters. Those fall under 25C and are not for new construction. If you’re building new, plan those under utility rebates instead.
• Contracting the solar before you own the house. If the builder includes it, you typically won’t get the 25D credit (the builder would incorporate cost and possibly claim under business credits). A common workaround is to rough-in for solar during construction (conduit, roofing provisions), then sign your solar contract as the owner post-closing.

Pro insight: On my last two spec builds, we designed solar-ready (dedicated roof penetrations, main panel upsized, conduit to attic) and had buyers install PV and a 10–15 kWh battery after closing. They each captured 30% of a roughly $36,000 package—about $10,800 in tax credit—without complicating the builder’s warranty or financing.

EV charging credit (Section 30C)

• 30% of installed cost up to $1,000 for a qualified EV charging station
• Caveat: Your property must be in a qualifying census tract (non-urban or low-income). Check the latest IRS eligibility map or ask your installer; don’t assume it applies everywhere.
• For new construction, you can often rough-in a 60–100A subfeed to the garage and install the charger after closing to ensure the credit lands with you.

What about Section 25C?

For new builds, 25C (Energy Efficient Home Improvement Credit) is generally off the table. It’s written for upgrades to an existing principal residence. If a salesperson tells you your new-build heat pump qualifies for 25C, they’re mixing up retrofit incentives with new construction.

A quick word on rentals and mixed-use

If you’re building a rental home, you usually won’t claim 25D. Instead, you may be eligible for the Section 48 Investment Tax Credit (ITC) for the solar/battery as business property, plus accelerated depreciation (5-year MACRS, and in some years bonus depreciation applies). It’s powerful but the rules and basis reductions differ. This is where a tax pro pays for themselves.

The builder credit that changes design decisions: Section 45L

45L is a federal tax credit for builders/developers who deliver high-efficiency new homes. Homeowners don’t claim it—but it can still benefit you if your builder participates and passes savings through in pricing or upgrades.

• $2,500 credit for ENERGY STAR certified new homes (single-family or multifamily)
• $5,000 credit for DOE Zero Energy Ready Home (ZERH) certified homes
• Extended through 2032, and available nationwide
• Requires third-party verification by a RESNET HERS Rater or equivalent
• Details vary by program version and climate zone (ENERGY STAR v3.1 or v3.2 for SF, MFNC program for multifamily; ZERH builds on ENERGY STAR plus added requirements like efficient ventilation, low-load design, and measures like ducts in conditioned space or equivalent performance)

What this means for you:

• If you’re selecting a builder, ask: “Do you participate in 45L? Are you ENERGY STAR or ZERH certified? Can you show examples?” An experienced high-performance builder can often hit the spec with modest premium over code.
• Negotiating leverage: I’ve seen builders discount by $2,500–$5,000 on homes they know will certify, or offer upgrades (ERV, better windows, advanced air sealing) of equal value. If they’re on the fence, offer to share the HERS rating cost ($1,000–$2,500) in exchange for the program benefits.
• Program side effects: Homes that meet these standards tend to have tighter envelopes, balanced ventilation, and lower loads. That translates into smaller HVAC equipment, lower energy bills, and better comfort—real lifetime value.

Common mistake:

• Specifying equipment that barely meets code and then trying to “back into” certification after framing. ENERGY STAR and ZERH are design-first programs. You need energy modeling before insulation is installed, and you must pass air-leakage tests. Get your HERS Rater engaged at permit stage.

Utility rebates and state programs: real money with real rules

This is where the geographic lottery kicks in. Some regions stack thousands of dollars on efficient equipment or on all-electric new construction. The process usually involves registration, pre-approval, inspections, and final paperwork. If you’re in a good utility territory and follow the steps, the rebates are very real.

Here’s how I coach clients to navigate:

1) Start at DSIRE (Database of State Incentives for Renewables & Efficiency). Search by ZIP and filter for new construction. Then check your utility’s “new homes” or “builder” rebate page.

2) Understand the two big patterns:

• Whole-home new construction incentives: Paid to builders/homeowners for meeting performance targets (ENERGY STAR, HERS threshold, all-electric). Often $1,000–$10,000 per home depending on tier.
• Equipment rebates: Heat pumps, heat pump water heaters, smart thermostats, induction ranges, duct sealing, heat pump clothes dryers, etc. Usually paid to the buyer or contractor.

3) Get pre-approval before rough-in. I cannot stress this enough. I’ve seen people miss out on $3,000 because they installed a heat pump water heater without registering the rebate first.

4) Work with installers who know the programs. The right contractor will register the project, use qualifying model numbers (AHRI-certified), and submit paperwork on your behalf.

Some real-world examples as of 2025 (verify current amounts locally):

• Massachusetts (Mass Save): New construction incentives for all-electric and high-performance homes commonly range from $5,000 to $10,000+. Additional incentives for heat pumps, HPWH, and incentives for Passive House multifamily are substantial.
• New York (NYSERDA): New construction programs with tiered incentives for energy modeling and certification; equipment rebates through utilities like Con Edison and National Grid on heat pumps and HPWHs.
• Colorado (Xcel Energy): New Homes program incentives for HERS targets; equipment rebates for cold-climate heat pumps and HPWHs. Solar rebates are limited but net metering is available.
• California: Utility rebates vary. Some municipals (e.g., SMUD) historically offered strong electrification incentives. SGIP provides hefty battery rebates depending on customer eligibility (particularly for medical baseline, wildfire PSPS areas).
• Texas (Oncor, Austin Energy, CPS Energy): Rebates on high-efficiency HVAC, tight ductwork, and new-home energy performance. Austin Energy’s Green Building Program can layer in incentives and marketing benefits.
• Pacific Northwest (PSE, PGE, Idaho Power, Avista): Rebates on heat pumps, heat pump water heaters, and electrically heated homes with specific measures.

Typical rebate ranges you might see:

• Heat pump space heating/cooling: $500–$2,000+ depending on capacity and efficiency (look for cold-climate NEEP-listed units in northern climates)
• Heat pump water heater: $300–$1,000+
• Smart thermostats: $50–$200
• New construction program tiers: $1,000–$10,000 depending on HERS or certification
• Solar/battery rebates: Not common across all utilities, but where offered can be significant (SGIP in CA for batteries can be thousands, particularly for equity-resiliency categories)

Process tips that save money:

• Confirm that model numbers are rebate-eligible. Rebates often specify minimum efficiencies (SEER2/HSPF2, EF for water heaters).
• Plan for commissioning. Many utilities require test-in/test-out or commissioning reports—budget time for it before closing walls.
• Collect documentation: AHRI certs, invoices with serial numbers, permits, and W-9 if incentives are taxable income (some rebates are treated as reductions in cost; check guidance).
• Assume 4–12 weeks to receive rebate checks after final paperwork. Don’t count on that money for closing unless your utility offers on-bill credits or contractor instant rebates.

Mortgage points and buydowns: when buying the rate makes sense

When rates are elevated, builder incentives and points become your best friend—if you do the math based on how long you’ll hold the loan.

Permanent points vs. temporary buydowns

• Permanent points: You pay upfront to cut the rate for the life of the loan. One point = 1% of the loan amount; the rate reduction per point varies with market. Typical cost to drop 0.25% to 0.5% might be 0.75–1.5 points depending on the day.
• Temporary buydown (e.g., 2-1, 3-2-1): The seller or builder funds an escrow that subsidizes your payment for the first years (e.g., 2% lower rate in year 1, 1% lower in year 2, then back to note rate). Great for near-term cash flow if you expect to refinance before the buydown expires.

A quick example to ground this:

• Loan amount: $600,000
• Market rate: 7.25% 30-year fixed
• Payment (principal + interest): about $4,095/month

Option A: Pay 2 points ($12,000) to drop rate to 6.25%

• New payment: about $3,695/month
• Savings: ~$400/month
• Break-even: $12,000 / $400 ≈ 30 months

If you think you’ll keep the loan more than 2.5 years, this looks good. If you’re confident you’ll refinance within 18 months, you may never “earn back” the points.

Option B: 2-1 buydown funded by builder for roughly $13,000 (varies)

• Year 1 effective rate: 5.25% → payment approx $3,315 (savings ~$780/month)
• Year 2 effective rate: 6.25% → payment approx $3,695 (savings ~$400/month)
• Year 3+ note rate resumes at 7.25% → payment $4,095

This option is ideal if your plan is to refinance in the first two years. The unused escrow (if you refi early) typically goes to reduce principal—so you don’t “lose” it, but your monthly payment savings stop when you refinance.

Pro insight:

• Builders often get wholesale pricing through preferred lenders, which can make a builder-paid 2-1 buydown extremely affordable for you compared to market.
• If you’re buying a spec home from a production builder, always ask for a rate incentive or buydown. I’ve seen packages worth 3–6% of loan amount lately, especially on inventory homes.

Price reduction vs. points: which is better?

• Points improve monthly cash flow more effectively than a small price reduction, especially at higher rates.
• That said, appraisal risk matters. In soft appraisal markets, a price reduction can ensure the deal closes smoothly and reduce your property tax basis.
• I often split the baby: negotiate a modest price reduction plus a builder-paid buydown. It diversifies your benefit.

ARMs and float-down locks

• 5/6 or 7/6 ARMs with reasonable caps can be attractive if you anticipate refinancing in 3–7 years, and the rate is materially lower than the fixed.
• Extended rate locks (6–12 months) are common for new construction. Look for a float-down option if rates drop before closing. There’s usually a fee, but it can be cheaper than market re-pricing.

Energy Efficient Mortgages and HomeStyle Energy

• Fannie Mae HomeStyle Energy lets you finance energy improvements up to 15% of the as-completed appraised value. On new builds, that can push you into better-performing specs without increasing cash to close.
• FHA/VA EEMs exist but are less common on custom builds. Still, ask your lender; sometimes they can roll solar or envelope upgrades into the appraisal with supportive documentation (use the Residential Green and Energy Efficient Addendum).

After-tax nuance

Mortgage interest may be deductible if you itemize, but the SALT cap and standard deduction mean many households don’t fully itemize. It’s worth running a quick scenario with your tax preparer. Assume your breakeven points based on pre-tax savings; consider any tax benefits as gravy.

Construction financing: interest carry is part of your capital stack

During construction, you’ll pay interest on drawn funds. Reducing carry can be as valuable as a modest rebate.

How to optimize:

• Shorten the schedule: Every month shaved off the build is a month of interest saved. Faster inspections, decisive selections, and a builder with lean jobsite management matters.
• Front-load long-lead orders: Windows, panels, and HVAC delays extend carry. Order early.
• One-time-close construction-to-perm loans can lock your permanent rate upfront and minimize transaction costs. Compare total fees and rate risk vs. a separate construction loan plus take-out mortgage.
• Rate caps: Some lenders offer an interest rate cap for the construction loan tied to the permanent lock—ask.
• Draw schedule discipline: Lenders release funds in stages. Encourage your builder to align draws with actual work-in-place to avoid interest on idle funds.

Typical construction loan math:

• Suppose a $700,000 build with a 10-month schedule, average outstanding balance of $350,000 over the period, and a 9% interest-only construction rate.
• Interest carry ≈ $350,000 x 0.09 x (10/12) ≈ $26,250
• Shaving two months saves roughly $5,250. That’s the size of a big rebate—achieved through better scheduling.

Design choices that qualify you for more money—and lower bills

High-performance homes unlock incentives and reduce operating costs, which behave like an “income stream” against your mortgage.

Low-lift, high-impact specs I push on new builds:

• All-electric design with cold-climate heat pumps (NEEP-listed where applicable), right-sized with room-by-room load calcs
• Heat pump water heater in a mechanical closet, garage, or insulated space with adequate airflow
• Tight envelope: blower door target ≤ 2.5 ACH50 in moderate climates, ≤ 1.5 in cold climates; continuous exterior insulation in colder zones
• Balanced ventilation: ERV or HRV to ensure good IAQ and to meet ENERGY STAR/ZERH requirements
• Ducts inside conditioned space or excellent duct sealing and testing (≤ 3% total leakage target if possible)
• High-quality windows: U-factors aligned with climate, SHGC tuned to orientation, and low-leakage installation
• Solar-ready roof: south/southwest exposure, minimal penetrations, conduit to electric panel
• Upsized main panel or “solar-ready” panelboard with a plan for a battery intertie
• Smart electrical design: dedicated circuits for induction range, EV, and heat pump dryer

Not only will this help you hit ENERGY STAR or even ZERH, it will permanently lower your monthly “utility mortgage.” On an all-electric 2,400 sf home in a temperate climate, I typically see $60–$120/month lower energy costs versus code-minimum gas + electric homes, especially if you add solar.

Stacking incentives without breaking rules

This is the choreography that makes a difference.

• 45L with ENERGY STAR/ZERH: The builder must register the project and use a HERS Rater for verification. As a buyer, you can ask the builder to target ZERH and share the credit benefits via pricing or upgrades.
• Utility new construction incentives: Pre-enroll the home before rough-in. Tie the ENERGY STAR/ZERH pathway to utility incentives if available; they often stack cleanly.
• 25D solar/battery/geothermal: Plan to install and place in service after you own the home to claim the credit. Rough-in during construction for clean execution.
• Equipment rebates: Ensure model numbers meet utility-eligible lists. Many allow builder or homeowner to receive funds; decide who applies early.
• Mortgage strategy: If your builder is contributing to a buydown, confirm lender guidelines and whether the credit caps out (conventional typically allows seller concessions 3–9% depending on LTV/occupancy). Don’t over-incentivize and hit caps while leaving funds stranded.

Order of operations I recommend: 1) Pick a builder who does high-performance homes and participates in programs. 2) Engage a HERS Rater during design; choose ENERGY STAR or ZERH target. 3) Register for utility new construction incentives immediately. 4) Design solar-ready and EV-ready infrastructure. 5) Lock in your mortgage with a builder buydown or points once framing begins and you’re confident on timeline. Add a float-down option if available. 6) Close on the home; install solar/battery afterward for 25D. 7) File the 25D credit with required documentation; confirm builder files 45L.

Case study 1: All-electric new build with solar and battery (Colorado, Xcel territory)

• Home: 2,500 sf, tight envelope (1.8 ACH50), balanced ventilation (ERV)
• HVAC: Cold-climate 3-ton variable speed heat pump, fully ducted
• Water heating: 80-gallon heat pump water heater
• Appliances: Induction range, heat pump dryer
• Solar-ready during construction; PV + 10 kWh battery installed after closing

Costs and incentives:

• HVAC premium vs. baseline: $6,000 (better heat pump, duct sealing, ERV)
• HPWH premium vs. gas tank: $1,800
• Energy modeling + HERS Rater: $1,800
• Solar + battery post-closing: $34,000 ($24,000 PV, $10,000 battery)

Incentives:

• Builder claims 45L: $2,500 (ENERGY STAR). Buyer negotiated a $2,500 credit at closing in exchange for builder pursuing certification.
• Utility rebates: $1,500 heat pump, $600 HPWH
• 25D: 30% of $34,000 = $10,200 federal tax credit for owner
• Net benefit to buyer at/after closing: $2,500 (builder pass-through) + $2,100 (utility) + $10,200 (25D) = $14,800
• Mortgage strategy: Builder paid a 2-1 buydown costing ~$12,500, dropping year-1 payment by ~$750/month on a $650,000 loan.

Energy bill impact:

• Modeled energy use: 12,000 kWh/year without PV; with 8 kW PV, net annual grid purchase drops to near-zero most months; battery covers evening peaks and outages
• Effective monthly savings vs. code-min gas + electric home: $110–$150/month on average

Total cost-of-capital impact:

• Upfront premiums ≈ $9,600 (HVAC + HPWH + HERS) offset by $2,100 utility + $2,500 builder pass-through = net $5,000 outlay
• 25D credit of $10,200 reduces net solar/battery cost to $23,800
• Monthly cash flow improves by $750 (year 1 due to buydown), then $400 (year 2), plus $110–$150/mo permanent utility savings thereafter
• Owner plans to refinance within 18 months, making the temporary buydown the better call than permanent points

Lessons:

• Staging solar post-closing secured the 25D credit
• Early HERS engagement enabled the builder to comfortably target ENERGY STAR, unlocking 45L and utility incentives
• The buydown matched the owner’s refinance plan, maximizing early cash flow

Case study 2: High-cost Northeast market focusing on envelope and heat pumps (Massachusetts)

• Home: 2,200 sf, 2-story, cold climate
• Specs: 2” exterior continuous insulation, triple-pane windows on north/east exposures, heat pumps with hyper-heat capability, ERV
• No solar initially due to shading; plan for future battery

Costs and incentives:

• Envelope upgrade premium vs. code: $12,000 (exterior insulation, window upgrades, air-sealing labor)
• HVAC premium vs. baseline gas: $7,500
• HERS Rater + program fees: $2,200

Incentives (typical Mass Save scenario; verify current numbers):

• New construction incentives for all-electric high-performance: $7,500–$10,000 range; assume $8,500
• Heat pump rebate: $1,250–$2,000; assume $1,500
• HPWH rebate: $750
• Builder 45L (ENERGY STAR): $2,500; buyer negotiated upgraded ERV and bath fans instead of direct price credit

Mortgage strategy:

• 30-year fixed at 7.125%; instead of points, buyer negotiated a $15,000 seller credit applied to closing costs and prepaid taxes/insurance, maximizing cash flexibility
• After modeling long-term hold, buyer opted for no points today, planning a refinance if rates dip below 5.75% in next 3–4 years

Energy bill impact:

• Measured blower door: 1.6 ACH50; duct leakage at 3% of fan flow
• Winter heating load dropped enough to downsize to a 2-ton and a 1.5-ton head, improving part-load efficiency
• Estimated utility savings: ~$120/month vs. code-min baseline

Total financial picture:

• Upgrades: ~$21,700
• Incentives captured: $8,500 (Mass Save) + $1,500 (HP) + $750 (HPWH) ≈ $10,750, plus builder’s 45L led to $1,200 in added ventilation upgrades
• Net extra spend: ~$9,750
• Utility savings ≈ $1,440/year → 6.8-year simple payback on efficiency delta, with comfort and air quality benefits that aren’t captured in payback math

Lesson:

• In a cold climate, envelope-first design pays twice: lower operating costs and right-sized equipment. Choosing not to buy down the rate made sense given an uncertain hold period and the value of liquidity.

Case study 3: Duplex rental build with solar under Section 48 (Mountain West)

• Property: New duplex, each unit 1,100 sf, all-electric
• Goal: Reduce operating expenses and market the property as low-cost living
• Solar: 12 kW shared with submetering, no battery initially

Tax treatment (business property):

• Section 48 ITC: 30% of installed cost (assume $30,000 PV → $9,000 ITC), subject to business rules and basis reduction
• Depreciation: 5-year MACRS on the remaining basis of the energy property; in years with bonus depreciation, the immediate deduction can be substantial
• Utility rebates: $0.25–$0.50/W where available; assume $2,400 utility rebate

Mortgage/valuation:

• Appraiser used income approach and recognized lower projected utility costs, allowing a slightly better cap rate justification
• Lender underwrote a lower operating expense line, improving DSCR

Lesson:

• For rentals, the homeowner 25D credit isn’t in play, but the commercial ITC and depreciation can be even more powerful. Engage a CPA early to structure ownership and optimize the credit and depreciation schedule.

Common mistakes that quietly kill your incentives

• Installing equipment before pre-approval. Many rebates require a reservation number. Get it first.
• Picking the wrong model. A heat pump that’s fantastic in Phoenix might not meet cold-climate specs in Minneapolis. Check eligible equipment lists and AHRI reference numbers.
• Missing third-party verification. ENERGY STAR/ZERH needs a Rater. Bring them in during design, not after drywall.
• Letting the builder include solar by default. If you want the 25D credit personally, plan to install PV after closing. Have the builder rough-in everything you need.
• Forgetting seller concession caps. If your lender caps contributions at, say, 3%, an oversized builder credit for buydowns and closing costs won’t fit.
• Overpaying for points with a short hold. If you’re likely to refinance within two years, temporary buydowns or ARMs usually beat permanent points.
• Ignoring interconnection timelines. In some markets, utility interconnection for solar can take 4–12 weeks post-install. Plan occupancy and billing expectations accordingly.

Step-by-step playbook: from design to tax filing

1) Set your financial goalposts

• How long do you plan to keep the home?
• Monthly payment comfort zone?
• Appetite for solar/battery now vs. later?
• Cash available for points vs. upgrades?

2) Choose the right builder

• Ask for recent homes with ENERGY STAR or ZERH certifications
• Request HERS scores and blower door results
• Confirm they’re familiar with 45L and local utility programs

3) Assemble the energy team early

• Hire a HERS Rater/energy consultant at schematic design
• Commit to a performance target (ENERGY STAR or ZERH)
• Use energy modeling to size HVAC, insulation, and window specs

4) Map incentives and register

• Check DSIRE and your utility’s new homes program
• Pre-register projects and reserve funding where required
• Agree in writing who claims which incentives (builder vs. owner)

5) Design solar- and battery-ready

• Specify roof layout clear of obstructions
• Conduit from roof to main panel
• Space allocation for future battery and critical loads subpanel
• Upsize the main service if needed (or plan for load management)

6) Lock your loan strategy

• Compare permanent points vs. builder-paid temporary buydown vs. ARM
• Match the choice to your likely refinance window and cash flow needs
• Confirm seller concession limits and structure incentives accordingly
• If doing a construction-to-perm, price extended locks and float-down features

7) Build tight, ventilate right

• Target air leakage that meets your program (and then some)
• Inspect flashing, insulation continuity, and duct practices before drywall
• Commission HVAC and ventilation—save the reports

8) Verify and certify

• Schedule midpoint and final HERS inspections
• Capture all documentation: AHRI certs, model numbers, serial numbers, invoices

9) Close and sequence energy installs

• If claiming 25D, schedule solar/battery install after you own the home
• Submit utility interconnection documents and net metering agreements

10) Rebate submissions and tracking

• File utility rebates immediately after commissioning
• Track expected timelines; follow up if checks lag

11) Tax filing

• Provide your CPA with itemized invoices, proof of payment, certification documents, and placed-in-service dates
• File 25D (and 30C if EVSE-eligible). Ensure builder files 45L if agreed.

12) Long-term optimization

• Monitor energy usage and PV production
• Consider TOU rates and battery charge windows
• Revisit refinancing when rates and break-even points align

Numbers that help you prioritize

When clients ask where to put their first dollar, here’s how I prioritize based on typical ROI and incentive stacking:

• Envelope and air sealing: Strong ROI, unlocks program tiers, reduces HVAC size. It’s hard to “retrofit” later.
• Right-sized high-efficiency heat pump system: Strong comfort and cost savings; big rebates available in many regions.
• Heat pump water heater: Great bang for the buck, especially with off-peak scheduling; common rebates.
• Solar-ready infrastructure: Low cost now, huge value later when you add PV/battery.
• Balanced ventilation: Improves health and comfort, required for many certifications.
• Solar PV: Excellent long-term return in most markets with 25D, especially if you can offset high retail rates.
• Battery: Utility-dependent; excellent for outages and TOU arbitrage; strongest in markets with high peak pricing or with equity-focused rebates.

Budgeting and timeframes

• HERS Rater + ENERGY STAR admin: $1,000–$2,500; schedule at design; final sign-off at completion
• Utility rebate processing: 4–12 weeks after approval
• Solar interconnection: 2–8 weeks (can be longer in congested markets)
• Battery backlog: 2–6 weeks for equipment; some markets longer
• Mortgage lock windows: 60–180 days common; fees for longer
• 25D credit: Claimed on your annual return; keep records for audit trail

Appraisal and valuation: don’t let value go invisible

I’ve watched high-performance homes appraise like commodity builds simply because the appraiser never got the data. Here’s how to fix that:

• Provide the appraiser with the Residential Green and Energy Efficient Addendum, filled out by your builder or rater.
• Include HERS score, ENERGY STAR/ZERH certificate, blower door results, HVAC specs, and modeled energy savings.
• Ask the lender to assign an appraiser competent in green valuation. Many have a roster; you can request it.
• For solar, request an appraiser who uses recognized PV valuation methods (e.g., income-based or depreciated replacement cost).

Better appraisal → better LTV → potentially better rate or lower MI.

Are rebates taxable?

• Some rebates reduce the basis of the property or equipment rather than being taxable income; others are treated differently depending on the payer and purpose.
• Federal credits like 25D reduce your tax liability directly and aren’t income.
• Utility rebates sometimes reduce the cost basis. It varies. Ask your CPA how to treat each incentive so you don’t get an unpleasant surprise.

Real-world equipment selections that pass the test

• Heat pumps: Look for variable-speed, cold-climate models with a decent COP at 5°F/17°F if you’re in a northern climate. In milder climates, prioritize part-load efficiency and right-sizing.
• Heat pump water heater: 65–80 gallon units for families; plan for condensate drain and adequate airflow. Consider hybrid mode for cold months if the location is tight.
• Ventilation: ERV with dedicated ductwork or integrated with air handler using proper controls; set ventilation rates to ASHRAE 62.2.
• Windows: U-factor ≤ 0.28 for many colder regions; tune SHGC on south-facing glass if you’re pursuing passive gains.
• Air sealing: Use AeroBarrier or thorough manual sealing plus blower-door-directed air sealing to hit targets quickly.

Quick FAQ

• Can I get 25C on my new build heat pump? Generally no. 25C is for improvements to existing homes. Focus on utility rebates and program incentives instead.
• Can my builder claim 25D for solar installed before I close? No; 25D is a homeowner credit. If the builder owns and installs, they may pursue business credits instead. If you want 25D, plan to install after closing.
• Are temporary buydowns worth it? If you expect to refinance in 1–3 years, yes. If you’re likely to hold the loan for 7–10+ years, consider permanent points.
• Is DOE Zero Energy Ready worth chasing? If your builder is experienced, yes. You get superior performance and comfort, and the 45L jump from $2,500 to $5,000 is significant for negotiations.
• Do batteries pencil without outages? Depends on your rate structure. With time-of-use rates or demand charges, batteries can provide meaningful savings. Without those, batteries are more about resilience and future flexibility.

A few professional “rules of thumb” I use

• If you can hit ≤ 2.0 ACH50 at modest cost, take it. Comfort and savings compound.
• Don’t oversize heat pumps. Load calculations, not rules of thumb.
• If your builder doesn’t know 45L and HERS, shop around. It’s a tell.
• If you’re on the fence about solar, at least go solar-ready. It costs a little now and pays later.
• Always pre-register for rebates. A 20-minute form can be worth thousands.
• Match your rate strategy to your timeline. Don’t buy permanent points when you’re already planning to refinance.

Tools and resources that make this easier

• DSIRE (Database of State Incentives for Renewables & Efficiency): Comprehensive incentive lookup by ZIP
• ENERGY STAR for Homes and DOE Zero Energy Ready: Program outlines, checklists, and requirements
• Rewiring America’s IRA calculator: Good for a high-level snapshot of federal incentives
• Your utility’s new construction portal: The rules are there; read them
• Lender with green lending experience: Ask them about HomeStyle Energy and EEM options
• A good HERS Rater: Worth every penny; they’re your incentive Sherpa

Bringing it all together

Treat your new build like a capital project with a pro forma. At the concept stage, sketch out the incentives you can realistically capture:

• Builder 45L via ENERGY STAR or ZERH certification
• Utility new construction incentives and equipment rebates
• 25D for solar, battery, or geothermal after closing
• A mortgage strategy tuned to your hold period—permanent points if you’ll keep it, temporary buydawn if you won’t

Then design the home to qualify—tight envelope, balanced ventilation, right-sized high-efficiency systems—and hire a team that does this work regularly. What you end up with isn’t just a lower cost of capital; it’s a quieter, healthier, more comfortable home that will be cheaper to own for decades.

If you’d like a quick sanity check on your numbers, here’s a simple framework I use with clients:

• Sum your expected incentives (utility + builder pass-through + federal credits)
• Subtract program and verification costs
• Estimate permanent monthly energy savings vs. a code-min baseline
• Translate those monthly savings into a “synthetic” rate reduction on your mortgage (every $100/month savings is roughly equivalent to lowering your rate about 0.25% on a $475,000 loan)
• Compare that to the cost and benefit of points or buydowns

Once you look at the whole picture—credits, rebates, mortgage pricing, and energy savings—you’ll make different choices. And they’ll pay you back every month you live in the home.